(Reuters) – Prudential (PRU.L) will try to draw a line under its botched Asian takeover at an investor meeting on Monday amid signs that investor fury over the deal is abating.
Pru’s annual general meeting on Monday comes less than a week after it was forced to ditch its agreed $35.5 billion takeover of AIG’s (AIG.N) Asian unit following shareholder protests that the deal was too expensive.
The failed bid has cast doubt over the future of Chief Executive Tidjane Thiam, and prompted calls for a review of Pru’s strategy, but two investors on Friday told Reuters there was no need for Thiam to quit.
“Thiam shouldn’t go. He comes across reasonably well operationally. It would be premature for him to go,” one large investor said, declining to be named.
“I am not minded to join the harpies to call for the resignation of management. People do need to calm down a bit,” said a second large shareholder.
WAIT AND SEE
Pru Chairman Harvey McGrath told the Financial Times that the “vast majority” of the group’s big investors did not want Thiam to step down.
“Everyone is in that mode of stopping and considering rather than doing anything rash,” said a third large investor.
“It’s probably better if everyone takes a deep breath and just sits tight for a while.”
Shareholder anger centered on Pru’s handling of the bid, which cost 450 million pounds ($658.8 million) in adviser fees and other charges and was marred by a confidence-sapping intervention over capital from the Financial Services Authority.
Investors and analysts add the bid itself was a legitimate attempt to speed up Prudential’s original strategy of pursuing capital-efficient, Asia-focused growth, and reckon its failure does not justify a strategic rethink.
“Asia can continue to grow, so what’s changed? Pru goes back to the day job, and given the dislocation of the last couple of months, not before time,” said ING analyst Kevin Ryan.
What becomes of AIG’s Asian business remains unclear.
AIG CEO Robert Benmosche asked the insurer’s board for time to explore options besides a public offering for its Asian life unit after the Pru deal unraveled, a source familiar with the matter said.
In defending the status quo, Pru is likely to point to a strong performance in the first three months of the year, when its total sales rose by a quarter, driven by 30 percent growth at the flagship Asian division.
“It’s a good business,” one investor said. “So yes, business as usual is fine. It may be incredibly boring, but it works.”
Investors and analysts play down renewed talk that Pru could be sold and broken up in the hope its parts would fetch more than the group is worth as a whole, citing difficulties in financing any such takeover in current volatile markets.
“They don’t need to do anything immediately. The break-up option is very hard to achieve and people will be very naive to assume that it can just be taken over in its entirety, or just be broken up very easily,” said the first investor.
Pru, made up of fast-growing Asian and U.S. divisions complemented by a mature but cash-generative UK arm, has long been the subject of break-up talk, fueled in part by concerns its share price undervalues its fast-growing Asian operation.
Pru’s biggest shareholder, U.S.-based Capital Research & Management, was reported in April to have explored a break-up of Pru as an alternative to the AIA deal.
(Editing by Michael Shields)