China bid for Prudential hinges on AIA

A potential bid for Prudential from big Chinese investors faces multiple obstacles, and would proceed only if an initial public offering from Asian rival AIA proves too expensive, bankers and analysts said.
By The Newsroom
Published 14th Sep 2010, 12:07 BST
Updated 14th Sep 2010, 12:07 BST

Prudential shares soared yesterday after the report said heavyweight Chinese investors who backed Pru's abortive bid for AIA earlier this year were in the "early stages" of weighing up an offer for the insurer.

The investors, who include Go Guangchang, chairman of China's Fosun International, and Fred Hu, previously chairman of Goldman Sachs in China, plan to keep only Prudential's flagship Asian division, the report said.

Prudential declined to comment.

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Analysts and bankers said the biggest hurdle for any takeover would be offloading Prudential's US and UK divisions at an attractive price.

One banker said Clive Cowdery's Resolution was the only obvious buyer for the UK business, reducing competitive tension in any eventual sale process.

"Such a deal would be very difficult to pull off and we are a very long way from anything happening," a second banker said.

Any bid would also depend on the price of AIA's planned IPO, seen as a competing investment opportunity for the Chinese investors.

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"I wouldn't rule it out, with (Prudential's) rating being very attractive relative to Asian life companies," said Berenberg Bank analyst Peter Eliot.

"But at the same time, I wouldn't want to get too carried away."

Related topics:China