Value of Prudential’s shares drops after AIG acquisition announced

4 March 2010

The value of shares at Prudential has dropped by 20 per cent following the news of its proposed takeover of the Asian arm of AIG’s insurance business.

Plans to purchase American International Assurance , AIG’s Asia life unit, were unveiled by Prudential earlier in the week.

However, since the $35.5 billion acquisition was announced, the value of its shares fell by 12 per cent on Monday and a further eight per cent on Tuesday.

Concerns have been raised over the size of the takeover bid and the financing behind the deal.

Prudential is planning on paying for the cash part of the acquisition through a rights issue worth a record-breaking $21 million.

The rest of the sum is to be paid in stocks and shares.

An investor told the Times: “This has been astonishingly badly handled. The Pru has overpaid and is paying away a lot of the growth prospects. The timing is a concern, with signs that China is slowing. This is going to be hard to justify for us.

“It clearly makes sense to buy into Asia over the next 10 to 20 years, but not if we don’t start getting the benefits until year seven.”

Prudential has been put on ‘negative watch’ by Fitching Ratings since the plan was announced.

By Jim Ottewill

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