Prudential PLC yesterday announced a rights issue to raise £14.5 billion (US$20.9 billion) to help finance its US$35.5 billion acquisition of the Asia-based life insurer AIA Group.
The announcement had been expected last week but Prudential was delayed by questions raised by the Financial Services Authority, the UK financial regulator.
Prudential shares fell 5 percent to 515 pence in early trading on the London Stock Exchange.
Prudential is offering 11 shares for every two existing shares in the company at an issue price of 104 pence (or HK$11.78 for shareholders in Hong Kong and Singapore).
The company said yesterday that the issue price represented a 39 percent discount based on Friday’s closing price of 542.5 pence.
Prudential also said it plans debt financing to raise US$5.4 billion and AIG, the bailed-out US insurance company which is selling AIA, has offered a standby commitment to subscribe to up to US$1.9 billion of that financing.
In a separate trading update, Prudential reported record new business sales of £807 million in the first quarter, a 26 percent increase from a year earlier. New business profit was up 27 percent to £427 million.
“We have the team, the skills and the discipline to successfully integrate these businesses and achieve the targets we have announced today,” said group chief executive Tidjane Thiam, for whom the deal looms as a make-or-break career moment.
“We believe that, through capital management and portfolio rationalization, there will be opportunities for the combined entity to create additional shareholder value over and beyond the revenue and cost synergies identified,” he said.
The British Financial Services Authority has refused to discuss its concerns on the deal, but Prudential said it had agreed with the regulator on future supervision of the enlarged group, “including on the capital that it will be expected to hold.”
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