Prudential’s plan to buy AIA hits a brick wall

It is back to the drawing board for
UK insurer Prudential and advisers on its planned £13.9bn ($20.7bn)
rights issue following a move by UK regulator the Financial Service
Board (FSA).

The FSA action on 5 May resulted in
a last minute delay to the release of a 1,000 page prospectus
detailing the issue.

The rights issue forms the key
funding avenue for Prudential’s $35.5bn acquisition of US insurer
American Insurance Group’s Asian life insurance unit AIA Group.

The delay was, according to UK
media reports, precipitated by concerns expressed by the FSA as to
the capital adequacy of Prudential following its merger with AIA
Group.

Of the total cost of the
acquisition of AIA Group, $25bn will be in cash, $8.5bn in
Prudential ordinary shares and $2bn in Prudential preference
shares. In addition to rights issue Prudential’s plan also calls
for it to raise $5bn via a senior debt issue.

Prudential is being advised on the
rights issue by Credit Suisse, JPMorgan, Cazenove and HSBC.

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