UPDATE 2-Voting adviser cautions against Pru deal

* RiskMetrics urges shareholders to vote against AIA deal

* Says Pru paying “full price”

* Pru says targets “robust and achievable”

(Writes through)

LONDON, May 26 (BestGrowthStock) – An influential voting adviser,
RiskMetrics, has told investors in Britain’s Prudential (PRU.L: )
to vote against the ambitious $35.5 billion takeover of AIG’s
Asian arm, despite acknowledging the strategic rationale for the
deal.

Just over a week before a key vote on the deal, which would
turn Prudential into the largest foreign-owned insurer in
fast-growing Asia, RiskMetrics Group (RISK.N: ) said Prudential
was paying a “full price” for American International Assurance.

It said Pru would need very high growth rates at AIG’s
(AIG.N: ) American International Assurance to meet “reasonable”
return on invested capital, “something that seems a stretch when
managing a difficult integration process”.

“A full price, integration risks and ambitious targets that
barely meet the cost of capital do not make a compelling
combination,” the report said.

“For this reason, it is recommended that shareholders vote
against the acquisition of AIA at the General Meeting.”

Prudential has faced considerable hurdles in the run-up to
the vote early next month, not least an unprecedented and
unexpected regulatory hitch that held back details of its bid
and the publication of its prospectus for almost two weeks,
fuelling investor and market skepticism about the deal.

Many shareholders and investors have expressed reservations
over the high cost of the takeover, which will be financed
through a record $21 billion rights issue.

RiskMetrics said that based on the deal and trading
multiples, the price tag being offered was “fair”, but said it
did not follow that the deal made sense for Prudential.

It said the price did not reflect a discount for AIA’s
situation — the near collapse of its parent, U.S. giant AIG,
and a drop in its own new business sales in key markets last
year — and said profit targets for the deal to work were “on
the high side”.

Shareholders are due vote on June 7. Prudential needs 75
percent of voting stock to be cast in favour for the deal to go
through.

A Pru spokeswoman said the firm disagreed with the
RiskMetrics recommendation, arguing its profit targets for the
deal are “robust and achievable”.

“We believe that the combination of AIA and Prudential
represents a compelling combination that will deliver very
attractive returns to our shareholders,” she said.

Pru’s top management is currently meeting shareholders to
sell the deal, the biggest ever in the insurance sector.

Prudential Chairman Harvey McGrath said on Tuesday that he
was confident the majority of investors would support the
acquisition in a vote scheduled for June 7. [ID:nSGE64O07E]

Separately, another proxy voting adviser, Manifest, said it
had reservations about how some Pru board members were
remunerated, but doubted that any such considerations would
affect a vote so tied to core corporate strategy.

Manifest CEO Sarah Wilson said she doubted whether any fund
managers would rely on proxy advisers to guide or conduct voting
on an issue so fundamental to the future of the company.

Stock Market News

(Reporting by Caroline Copley, Joel Dimmock and Denny Thomas;
Editing by Mike Nesbit)

UPDATE 2-Voting adviser cautions against Pru deal