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Prudential’s Secondary Listing On The SGX – Were You Listening?
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By: Louis Kent Lee
Articles (199) Profile

Prudential, British-based insurance giant has successfully listed its shares on the Singapore Exchange (SGX) by way of introduction, in addition to a primary listing in Hong Kong. Quoted in board lots of 500 shares, the counter is trading in US dollars under the abbreviated name “Pru 500”.

The steadfast momentum of Prudential’s dual listing is to purchase American International Assurance (AIA), American International Group’s (AIG) Asian operations for $35.5 billion in which would be the biggest ever insurance deal. The acquisition is said to expand Prudential’s global reach and to attract Asian investors to snap up its shares. The listings in Singapore and Hong Kong are expected to be popular among investors because of Prudential’s reputable brand name.

Moving The Rights Forward
Prudential’s groundbreaking offer of $35.5 billion for AIA will be funded by a rights issue of $21 billion in which the insurer seeks to raise by making a discounted offer of 11 new shares for every two that sharesholders own at £1. 04 ($2.09) each. The hurdles Prudential encountered for this acquisition to be has been transparent in which the biggest hurdle among them all would be getting the 75% approval from its shareholders by 7 June. Investors in Singapore will have to take up the Prudential shares before the stipulated date of June 7 to be entitled the rights issue offer.

“This is an effort to populate the register with Asian shareholders who are more supportive of the deal. It’s still uncertain this deal is going to go ahead because 75 per cent is a high hurdle rate,” said Eamonn Flanagan, a Liverpool-based analyst at Shore Capital Group Ltd with a “Buy” rating on Prudential.

Prior to that, Prudential’s Asian listing was delayed as concern was raised by UK’s Financial Services Authority that the insurer would not have enough financial cushion left after the acquisition. In view of all these hurdles, Prudential’s stand on taking over AIA remains unfazed. The acquisition will double its business size with its Asian operations accounting for more than half of its profits.

While some shareholders have expressed concern about Prudential’s acquisition of AIA, most of them support the deal. According to Prudential’s chairman Harvey McGrath, “they can participate in AIA’s recovery from the difficult period it’s been through because of (the problems faced by) AIG…and (benefit from) the synergy of the combination of two leading insurers.”

The Name Is New Prudential
“The two new listings will enable investors in Asia to participate in the outstanding growth potential that Prudential offers. The combined business will be a fast growing and highly profitable company, with a leading position in many of the most attractive markets in the world,” said Tidjane Thiam, Prudential’s chief executive.

As of now, Asia accounts for 21.9% of the world’s insurance business. The insurer plans to increase this number to 40% of the global growth in the next five years. According to the insurer, the new combined company of AIA and Prudential will be called New Prudential.

Following the formation of New Prudential, rivals like Great Eastern will be forced to step up in order to secure their market holdings as New Prudential’s mammoth business size will cast a shadow over its rivals. Shareholders’ fear of the insurer’s capital dilution remains the biggest hurdle for Prudential’s acquisition of AIA. However, if the deal does go through, Prudential’s outreach will be far more impressive than it was before as it will now be able to synergise with AIA’s 30 million customers’ outreach in the Asian region. When that happens, the insurer will be substantiating its catch phrase and will be listening to more people than it did before.

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

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Prudential PLC  -- -- --   
Business: Co provides a range of retail financial products and services, and asset management services.

Insight: Mar-17, FY16 net profit decreased by 25.5% despite... Read More

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