Prudential Plc shares fell on their Asia debut on Tuesday, hit by a global sell-off and concerns over shareholder support for the British insurer's planned purchase of AIA, the industry's biggest acquisition.
Prudential <2378.HK> is buying American International Group Inc's Asian life insurance business AIA for $35.5 billion, and aims to raise $21 billion from the world's biggest acquisition-funding rights offering.
By listing shares in Hong Kong and Singapore, Prudential aims to attract more Asian investors, who are expected to be key to the success of the rights issue.
The listing of Prudential in Hong Kong and in Singapore was by way of introduction -- meaning a small portion of the existing London-listed shares were converted to be eligible for trading in Asia. No new capital was raised.
The shares were down 1.3 percent at HK$58.90 by midday in Hong Kong compared to their HK$59.70 opening level, which was based on the London close of 530 pence on Monday.
Fewer than 400,000 shares changed hands. The benchmark Hang Seng Index <.HSI> was down 2.6 percent.
Given the weak market sentiment and small amount of Prudential shares converted to Hong Kong from London, the shares are underperforming, said Y.K. Chan, a strategist at Phillip Capital Management, referring to the drop in the shares compared to their London close.
NOT A DONE DEAL YET
Besides, it is still uncertain whether Prudential can successfully acquire AIA, Chan added.
Many shareholders remain unsure about the AIA deal and the price that Prudential is paying. A make-or-break vote on the deal set for June 7 appears too close to call.
And Mark Wilson, the head of AIA, has threatened to quit his post if the takeover goes ahead, the Financial Times reported.
Prudential Chairman Harvey McGrath declined to comment on the FT report when asked about it in Hong Kong, where he attended a listing ceremony of the shares.
But he said the company's shareholders are comfortable with the deal.
The response is constructive ... the vast majority of shareholders are comfortable with the AIA transaction, McGrath told reporters.
In Singapore, Prudential shares were trading at US$7.54 in volume of 212,500 shares. They had opened at $7.72. The main Singapore index <.FTSTI> was down 1.9 percent.
Prudential's bankers, Credit Suisse , HSBC Holdings <0005.HK> and JP Morgan Cazenove, are responsible for providing ample liquidity for the stock in Asia in the initial days of trading.
Prudential, with a market value of $19 billion, has converted 50.97 million shares from London in the first batch to be traded in Hong Kong, about 2 percent of its total issued share capital.
Despite the risks of the takeover failing, Asian retail and institutional investors alike recognized that buying into Prudential would also be buying into AIA, a widely known name in the region.
The enlarged Prudential, with AIA in its fold, would offer investors exposure to many Asian markets, unlike Chinese insurers listed in Hong Kong, which are pure-China plays, analysts said.
According to Prudential, absorbing AIA would make it the largest life insurer in Hong Kong and Southeast Asia. The combined group would also be the biggest foreign insurer in China and India, with substantial operations in the United States and Britain.
In contrast, Hong Kong-listed insurers China Life <2628.HK>, China Pacific <601601.SS> <2601.HK> and Ping An Insurance <2318.HK> have few businesses outside China. (Additional reporting by Kevin Lim in SINGAPORE; Writing by Muralikumar Anantharaman; Editing by Ian Geoghegan)