DEALTALK-Rivalry haunts Prudential/AIA integration

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* Prudential prospectus for $21 bln cash call due next week
* Old rivalry between Pru, AIA could disrupt integration

* Anti-trust scrutiny may impact key Asian markets

By Myles Neligan and Victoria Howley

LONDON, April 22 (BestGrowthStock) – British insurer Prudential
(PRU.L: ) will try to reassure investors it can seamlessly absorb
the Asian arm of AIG next week when it publishes the prospectus
for a record $21 billion cash call to fund the takeover.

With shareholders broadly backing the deal’s strategic
rationale, attention is now turning to the obstacles that could
impede it. They include anti-trust intervention and a history of
deadly rivalry between the Asian divisions.

“These transactions are effected at the shareholder level by
shuffling a few bits of papers around, which, as long as
everyone can agree, happens reasonably quickly,” said Tony
Silverman, an analyst at S&P Equity Research in London.

“But there’s a big job to do to integrate the sales forces
on the ground. It’s going to take a year or two.”

Shareholders have told Reuters they want the prospectus to
include full details of synergies and the integration plan as
well as the rights issue price and fee details so they can
decide whether to back the immense deal.

Personal rivalries and a mis-match between the two cultures
could provoke an exodus of senior executives when they team up,
according to one person working on the deal.

“They don’t like each other,” he said.

“Given the overlap in their Hong Kong office, there are
going to be some pretty significant social issues. Whether
people leave or are asked to leave, the result will be the
same.”

One senior AIA executive, who asked not to be named,
described the two sides as “arch enemies” and Prudential has so
far kept a diplomatic silence on who will lead the enlarged
Asian operation.

Bankers see the appointment process as a two-horse race
between Barry Stowe, currently CEO of Prudential Asia, and Mark
Wilson, his opposite number at AIA, with the losing candidate
likely to quit once the final decision is made.

Prudential last week gave the job of integrating the Asian
units to its UK CEO, Rob Devey — seen as neutral because of his
British background and designed to avoid inflaming tensions
between the rival Asian camps, bankers said.

Worries about the impact of the takeover are not confined to
the upper echelons of the organisations. Back-office staff will
lose their jobs as Prudential needs to deliver on 340 million
pounds ($523 million) in cost savings.

And while Pru plans to expand the two companies’ combined
sales force, frontline sales staff are also uncertain about how
the integration process will pan out.

“I will only be concerned about my future when Prudential
and AIA comes under one entity. Then the culture might be
different and a lot of changes may be made,” said one AIA sales
employee, speaking on condition of anonymity. He said commission
systems were different for a start.

ANTI-TRUST HURDLES

Pru’s $35.5 billion takeover of AIA, the insurance sector’s
biggest ever acquisition, will double the British group’s
exposure to Asia, where demand for personal financial services
is booming thanks to robust economic expansion.

The deal looks set to create a new force in Asian life
insurance holding the number one position in 7 countries across
the region, including Hong Kong and Singapore.

Intervention by competition watchdogs can’t be ruled out,
despite Prudential Chief Executive Tidjane Thiam saying
intervention by local regulators was “not a major concern”.

Analysts at Oriel Securities said there could be questions
over the combined group in markets including Hong Kong,
Singapore, Malaysia, the Philippines and China.

Wenli Yuan, a Hong Kong-based analyst at consultants Celent,
said the deal could also need a review of the firms’ joint
venture arrangements in some countries and some changes to their
bancassurance deals, with integration “a very complicated
problem”.

AIA could not be reached immediately for comment. A
Prudential spokesman in London said that the successful
integration of the company with AIA in Asia was critical to
ensuring it delivered long-term value to shareholders.

Investment Advice

($1=.6501 Pound)
(Additional reporting by Michael Flaherty, Denny Thomas and
Ronnie Koo; Editing by Jon Loades-Carter)

DEALTALK-Rivalry haunts Prudential/AIA integration