Prudential problems

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The UK’s Prudential Assurance wants to buy AIG’s Asian arm, AIA. It has offered £24bn. To help finance this deal it planned to ask shareholders to subscribe to a massive £14bn rights issue.

However, the UK’s Financial Services Authority (the regulator) has stepped in at the last moment and caused Prudential to put the cash call on hold. The FSA is worried that the deal is just far too ambitious and would put a severe strain on the capital position of the enlarged group.

There is much speculation that Prudential will sell off its UK and U.S. (Jackson) arms once the acquisition is completed. This will completely transform the business and the brand. If the ‘Pru’ quits the UK it will, in all probability, shift its headquarters to Singapore or Hong Kong. It might also transfer its stock market listing to an Asian bourse.

Thus, will a very famous name disappear from the UK scene—an event that would have been almost unforeseeable a few years ago? However, the UK and U.S. markets are ex-growth and Prudential must follow the money.

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