Prudential to seek listing in Hong Kong before rights issue launch

Pru will now seek the dual listing in Hong Kong before launching its 21 billion US dollar (13.8bn) rights issue, having initially planned to make the move after the fundraising.

Asian investors who buy the shares will be able to take part in the share placing, which will fund Pru's 35.5 billion dollar (23.5bn) takeover of AIG's Asian business.

There is expected to be strong existing appetite for shares among Asian investors, given that US insurance giant AIG had been preparing its AIA business for flotation before striking the deal with the Pru.

Yesterday's announcement also comes amid reports of a lack of demand among Pru's major UK shareholders, with concerns said to be growing over the size of the rights issue and the deal price.

Shares in the life and pensions group plummeted by 20 per cent last week in the wake of its AIA takeover news. But the stock has since pulled out of its nosedive, recovering a large slice of last week's losses.

A Pru spokesman played down suggestions the Hong Kong listing has been accelerated due to problems with demand in the UK. Its AIA takeover will transform Pru into the largest player in the region, with around 30 million customers in Asia. The group's chief executive Tidjane Thiam said on unveiling the deal that it was a "one-off opportunity" for the group.

However, Pru will need to stage the UK's biggest ever rights issue to finance the acquisition.

Mr Thiam will this week begin a charm offensive with major investors to gain support for its plans.

The group has around 75,000 investors, with 30 per cent of the company owned by the top seven largest shareholders – including Legal & General with a stake of around 5 per cent, private equity firm BlackRock and global fund manager Fidelity. There are around 60,000 retail investors.

The rights issue is fully underwritten by three banks, which have since recruited around 30 sub-underwriters to share the risk, including other banks and investors such as sovereign wealth funds.

Pru has not set a date for the dual listing in Hong Kong, but the rights issue is due to kick-off in May, with deal closure expected in July. While the acquisition will be transformational for Pru, there are worries over the scale of the takeover.

Jonathan Jackson, head of equities, Killik & Co, said there was a "huge execution risk" with a deal of this size, which will create a business with a combined sales workforce of nearly 700,000 agents.

He warned over further share volatility, but added: "While we have reservations over some aspects of the deal, we like the long-term attractions of the combination."