UPDATE 2-FACTBOX-Wary Pru investors digest $21 bln rights issue

(Adds fresh investor comment)

LONDON, May 17 (BestGrowthStock) – Britain’s Prudential (PRU.L: )
unveiled a $21 billion rights issue on Monday, offering new
shares as it seeks to finance a planned acquisition of AIG’s
(AIG.N: ) Asian insurance business. [ID:nTOE64G02C]

Following are reactions relating to levels of shareholder
support for the offer:


“There is nothing in the announcement that would change
people’s positioning where they were prior to the hiccup because
although embedded values have gone up, some of the cost
synergies have gone up, revenue synergies have gone up.

“It all comes down to whether you believe management and
whether you believe that Asian growth is going to be as good as
they have suggested.

“On balance, I have not changed my view which is on the
positive side and equally I don’t suppose there’s anything new
in there going to change someone who is a bit negative.

“My view is if they don’t do this, then in time they will
probably become prey in the region. Simplistically, I would
rather have a company we own being dominant than another.”


“The key takeaways are: they have got a more hybrid capital
in there, they have got a standby facility as well which is good
and the results are strong.

“They have also confirmed something we didn’t know before –
the amount of capital that is semi-trapped. They have 5.2
billion pounds of surplus capital and on top of that they have
1.2 billion pounds which they have not included in that surplus.
That is primarily from entities in Singapore and Thailand. So
from a total capital perspective, the surplus is even stronger.

“They have also provided a nice little sensitivity analysis
of what happens if there is an instantaneous 20 percent fall in
the markets. So if the markets almost halve, they would still be
in a reasonable capital position.

“These figures are a bit more reassuring and I am quite
pleased with this at an initial glance, but we have got to delve
into the detail and we have 1,000 pages to have a go at.”


“I think they will have quite a lot of trouble raising that
cash, to be honest. I think they do supposedly have backers in
Asia, particularly the government of Singapore, but I think it’s
still going to be a very difficult deal to execute.

“I mean we and other shareholders believe the price is too
high and the financial case for the deal hasn’t been
particularly well articulated, so I think they are going to have
a difficult task getting this deal through.

“When you’re raising 14billion pounds, one needs a lot of
strategic and financial precision and we didn’t get that first
time round and we are sceptical.”

“We’re sceptical on price. They got into a mess in terms of
capital, and we’re not clear in terms of the strategy in terms
of the UK business and indeed some of the Asian businesses
they’re buying, so we need a lot more new information and we are

(Cumming was speaking on BBC radio. Standard Life is the
17th largest investor in Prudential with a 0.78 pct stake)


“They have priced pretty much as people expected but at
least it’s in play now. Roll on June 7th for the vote really.

“The vote is a really, really difficult one to call. They
had to offer a bit more in terms of underwriting fees. It’s a
big issue and we are at a very volatile point in markets as

“It’s always been a bit of risk that because they’ve bid an
absolute amount against a fluctuating share price. You’ve got a
problem of taking on market risk and you’ve got market risk at
this point because of the volatility in the markets.

“I think if Capital (Capital Management) were actively
against it, I don’t think Pru would have risked it because you
can’t have such a big holder against the deal when you need 75
percent approval.”


“The size of the right issue is largely as expected but it
is a huge amount of money to actually get hold off.

“From the first quarter figures, it looks as though the
company is trading pretty well in its own right without the
acquisition. Personally, I’m feeling a bit dubious as to whether
it is the best thing for shareholders.

“They have got some punchy targets looking forward in terms
of profitability of the group, but it does rely on the Far
Eastern markets. They have got more eggs in one basket than
before the issue.

“The initial reaction of the market was to mark the price
down. It’s recovered a bit, but that’s still down which is

(Cavendish has a 2.5 million pound holding in Prudential)


“Today’s announcement is not a game changer. I expect
Prudential management are relieved that they have finally come
out with it, but it doesn’t really change anything materially.
If you were against the deal before, you will still be against

“On the cost side, they look to be slightly better but again
it’s not material to really change our view. It will depend to a
large degree on how management present when they have their
final meetings with investors in the next few days but I don’t
see them really departing from the script. It will be a pretty
close run thing.”


“We were talking about financial returns and profits, but in
the absence of detailed financial information it was impossible
for them to make a (decision), quite simply.

“We have been very keen to get to this point today where we
can finally tell the full story. If you want an analogy, we were
a little bit like a fighter fighting with one arm behind his
back. We were handicapped, we weren’t able to answer a lot of
questions, which was frustrating for our shareholders.

“They have been quite supportive in this period… and have
given us the benefit of the doubt and the chance to come out
today and tell our story. We are confident, the quality of this
story is phenomenal.”


“All I can say is that Mr Thiam must have tapped his major
institutional shareholders about the need for this money and
must he have satisfied them.

“This would be an amazing achievement in the light of the
current market, as sentiment is fairly negative.”

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(Compiled by Paul Hoskins; reporting by Raji Menon, Clara
Ferreira-Marques and Myles Neligan)

UPDATE 2-FACTBOX-Wary Pru investors digest $21 bln rights issue