Most of Prudential Plc's investors are comfortable with its bid for AIG's Asian life unit AIA, its chairman said, moving to dispel fears shareholders may baulk at the $35.5 billion cost of the deal.
The vast majority of shareholders are comfortable with the AIA transaction, Prudential Chairman Harvey McGrath told reporters on Tuesday, adding he was confident investors will support the acquisition in a vote scheduled for June 7.
McGrath's comments came as Pru shares fell on their debut in Hong Kong and Singapore, weighed down by a global stock market selloff and fresh concerns over waning investor support for the AIA deal, the insurance sector's biggest ever takeover.
The Financial Times reported AIA Chief Executive Mark Wilson plans to quit if the takeover goes ahead. His threatened departure could stir worries over Prudential's ability to seamlessly merge AIA with its own Asian business, analysts said.
His departure would likely provoke the loss or defection of further key staff and could create considerable integration problems for Prudential, Oriel Securities analyst Marcus Barnard wrote in a note.
Prudential said Wilson had not informed it of any plan to step down. We have not had any indication from Mark Wilson that he intends to leave AIA, Prudential said in a statement.
We have every confidence in the strength and depth of the management teams in both businesses and in our ability to deliver an effective integration.
The outcome of the June 7 vote on the deal has been in doubt due to shareholder reservations over the high cost of the takeover, to be financed via a record $21 billion rights issue. The deal needs 75 percent approval to proceed.
It's too early to say if the Mark Wilson news will have an impact, but I think it's going to be really close, said Panmure Gordon analyst Barrie Cornes.
Some of the institutions I've spoken to who are on the fence are coming down slightly more in favor.
Prudential shares closed 3.6 percent lower at 511 pence in London, underperforming the FTSE 100 index, which was off 2.5 percent amid fresh worries over eurozone sovereign debts. <.EU>
Pru's Hong Kong-listed shares <2378.HK> settled down 4.1 percent in low volume at HK$57.20 on their first day of trading, while the benchmark Hang Seng Index <.HSI> fell 3.5 percent.
In Singapore the stock settled 4 percent lower while the main Singapore index <.FTSTI> fell 2.7 percent.
Prudential's Asian listings, launched on Tuesday, are aimed at attracting more of the region's investors, who are expected to be key to the success of the rights issue.
No new capital was raised in the Asia flotation, which was achieved by converting some 2 percent of Pru's UK-listed stock for trading in Hong Kong.
Prudential's McGrath said he expected about 10 to 20 percent of Prudential's overall market capitalization to shift to Asia over the next 12 to 24 months.
Prudential's bankers Credit Suisse , HSBC <0005.HK> and JP Morgan Cazenove are responsible for providing liquidity for the stock in Asia in the initial days of trading.
The enlarged Prudential, with AIA in its fold, could appeal because it offers investors exposure to many Asian markets, unlike Hong Kong-listed Chinese insurers which are pure China plays, analysts say.
According to Prudential, absorbing AIA would make it the largest life insurer in Hong Kong and southeast Asia. It would also be the biggest foreign insurer in China and India, with substantial operations in the United States and Britain.
(Additional reporting by Kevin Lim in Singapore, with Kennix Chim in Hong Kong; Writing by Muralikumar Anantharaman; Editing by Ian Geoghegan and David Holmes)