UK’s Prudential to shun M&A after failed AIA bid

* Big cross-border takeovers “very difficult” – chairman
* Pru eyes more “bolt-on” acquisitions – chairman

* Asia buying opportunities limited – Pru Asia CEO

By Myles Neligan

LONDON, June 7 (BestGrowthStock) – UK-based insurer Prudential
(PRU.L: ) said on Monday it would avoid big merger and acquisition
deals in the wake of its failed bid for AIG’s (AIG.N: )
Asia-focused AIA unit, pledging a period of stability instead.

Prudential will concentrate on growth from within, although
it would still consider small-scale takeovers to boost its
presence in fast-growing Asia, its chairman, Harvey McGrath,
told shareholders at the annual general meeting in London, where
several shareholders expressed their anger over the AIA bid.

“One of the lessons we’ve learnt is that in the post-crisis
world we live in, doing large cross-border acquisitions in
financial services is going to be very difficult,” McGrath said.

“I think we’ll continue to seek to grow this business
organically. You should expect us to look at bolt-on

Prudential management was forced into a humiliating
withdrawal from its deal to acquire AIA last week after its
shareholders baulked at the $35.5 billion agreed price and AIG
rejected a reduced offer.

The failed bid, which cost the insurer 450 million pounds
($652.9 million) in fees, has prompted calls for the company to
consider radical moves to boost shareholder returns by selling
off parts of its business.

But Prudential’s McGrath dampened expectations of a
break-up, saying there would be no imminent disposals.

“We do not think we need to in the very near term kneejerk
into any asset sales or other fundamental restructuring,” he
told investors.

Prudential, made up of fast-growing U.S. and Asian divisions
complemented by a mature but cash-rich UK arm, has long been the
subject of break-up speculation.

Advocates of a break-up argue that Prudential’s flagship
Asian unit would be worth more if it were spun off as a
standalone company, although some analysts say it is too early
for the insurer to consider getting rid of its most promising

Barry Stowe, the head of Prudential’s Asian business, told
Reuters that selling or floating the Asian business might harm
shareholder returns at this stage.

“These concepts are always considered, but to date we’ve not
been convinced that it would be in the shareholders best
interests because we’re concerned that it might actually
represent value leakage.”

Stowe added that Prudential’s appetite for takeovers in Asia
will be naturally constrained by a lack of buying opportunities.

“You don’t see lots of opportunities in Asia because there
are a lot more buyers than there are sellers, but to the extent
that there are bolt-on opportunities we would look at those with
a lot of interest,” he said.

The most recent bolt-on acquisition completed by Prudential
was its $307 millioon takeover of the life insurance business of
Singapore bank UOB (UOBH.SI: ) in January. [ID:nSGE6050DT]
($1=.6892 pounds)


(Editing by Greg Mahlich)

UK’s Prudential to shun M&A after failed AIA bid