Prudential’s strategy to appease shareholders: It will spit out what it can’t chew as it swallows a business bigger than itself.
The UK’s largest insurer is expected to outline divestments of some Asian assets in its upcoming rights offering prospectus to allay concerns about its planned $35.5 billion acquisition of AIA, AIG’s Asian life insurance unit.
Shareholders have become fretful about Prudential’s ability to pull off the mega transaction. It hit a regulatory snag last week and delayed the release of the prospectus for the $21 billion rights issue to part fund the deal.
Reuters reported in March that Prudential was expected to exit some Asian markets after the completion of the American International Assurance (AIA) buy, to focus on key markets and raise at least $1 billion.
“For most countries in Asia they have still not reached a conclusion for integration plans. For some, they will probably announce on the day the prospectus is out,” a source told Reuters. Prudential may have to go beyond a few asset divestitures to satisfy shareholders. Capital Research & Management, its largest shareholder, reportedly would like to se
e the group to be broken up.