DealZone

Prudential’s Eastern promise

(Acquisitions Monthly) Tidjane Thiam unveiled his proposal to transform the Pru into an Asian-focused animal just five months after taking over as chief executive of the stately British insurer. The former Aviva man obviously feels the opportunity presented by state-supported AIG’s effectively forced sale of its Asian crown jewel was too immense to ignore.

The US$35 billion transaction – the biggest ever in the sector – also fits in with the currently accepted reading of the financial runes: that the thriving economies of Asia will provide much of the next decade’s growth. Nevertheless Thiam has done well to secure the services of three of the financial crisis’s undoubted winners in Credit Suisse, JP Morgan Cazenove and HSBC.

The impressive line-up are only too willing to flex their financial might to back such a deal through a US$21 billion underwritten rights issue, the largest ever for acquisition purposes. If the Pru’s biggest investors, Capital, BlackRock and Legal & General, are unwilling to take up their rights, finding fresh investors should not be too difficult.

Institutions had already been sounded out about buying shares in AIA directly, via a Hong Kong float, led by Deutsche and Morgan Stanley, touted to bring in up to US$20 billion. The Pru is paying a rich price, 24 times last year’s US$1.44 billion operating profits, to take control of AIA. It seems unlikely that a rival will step in and spoil the show.

Chinese financial players would be unwilling to enter a bidding war, based on past form. In the US, MetLife is already in negotiations to buy AIG’s American Life Insurance Company for up to US$15 billion. General Re owner Warren Buffett seems spent after splashing out US$26 billion for Burlington Northern railroad.

Battered car-makers rounding blind corner

AUTOSHOW/(Update: This piece was written, as several commenters have pointed out, before GM clinched a sale of Saab to Spyker on January 26.)

By Quentin Carruthers

(Acquisitions Monthly) Automakers face a demand slump in Europe and the longer-term challenge of addressing climate change. Both pressures are expected to lead to further restructuring, consolidation and M&A activity.

The North American International Auto Show, held each January in Detroit, Michigan, is just coming to an end. Detroit is the hometown of America’s “Big Three” automobile makers – Ford, General Motors, and Chrysler – and the show constitutes one of the most important events in the industry’s calendar.

Hostilities resume

wwwreuterscomboxing1(Acquisitions Monthly) The past year has seen the return of the hostile bid approach, requiring advisers to deploy their full range of defensive skills to fend off such opportunistic offers, or force the bidders to raise their price.

Finding the right balance between those two goals can be notoriously tricky. In theory, National Express defended itself successfully from a series of approaches this year, initially from transport rival First Group then from private equity group CVC in conjunction with major shareholder the Cosmen family and latterly Stagecoach.

However, this victory looks Pyrrhic. The company’s share price is 25% below the high point it reached during the offer period. Added to that, the board also now faces a disgruntled shareholder base. Hedge funds are seeking quick profits while its largest investor is at strategic odds with the directors and unwilling to support a rights issue.