DealZone

Pru gets an earful over AIA deal

May 26, 2010

RiskMetrics has weighed in against Pru buying AIG’s AIA Asian assets, saying $35.5 billion is too much. The risk advisory firm joins a chorus of analysts chirping away from Singapore to London about problems with a deal that would pay off a huge chunk of AIG’s debt to Uncle Sam while transforming Pru into an Asian powerhouse.

Prudential holds a shareholders vote on June 7 to clear a $21 billion rights offer to fund the acquisition. One big issue is the price tag, which has drawn scrutiny given the fact that AIG has limited leverage to demand a big premium since it is selling the assets under duress. Pru’s ability to hit its projected revenue “synergies” from the deal are a big concern too.

CLSA Asia Pacific Markets, a broker not involved with deal, said in a report last week that a plan keeping both AIA and Pru brands intact and competing with each other will negate such gains. “It is already a challenge to retain agents, let alone target a dramatic increase in sales,” CLSA said.

The view of RiskMetrics, which itself was bought only a couple of months ago, could help to unravel a big deal just when the falling market looks set to start pulling the rug out from under the M&A market.

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“One big issue is the price tag, which has drawn scrutiny given the fact that AIG has limited leverage to demand a big premium since it is selling the assets under duress. Pru’s ability to hit its projected revenue “synergies” from the deal are a big concern too.”

Even my dog could see the obvious argument here. Pardon my ignorance, but who’s advising Pru here and who’s getting the benefits of the huge premium AIG is undeservingly commanding?

Posted by doctorjay317 | Report as abusive
 

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