Update: Pru forced to delay record rights issue

5th May 2010 11:38

Insurer Prudential has had to postpone publication of its prospectus detailing the terms of a $21bn (£14bn) rights issue to fund the $35.5bn (£23bn) acquisition of AIG's Asian (AIA) businesses. The UK firm was due to release its timetable today, but it's still in discussions with the City regulator about the takeover, especially the capital position of the enlarged group under the Insurance Groups Directive (IGD)."As a result, Prudential has decided to delay the pricing and launch of the rights issue whilst it seeks to bring its discussions with the FSA to a conclusion," it said Wednesday.The group now expects to price and launch the record cash call, and publish the rights issue prospectus once talks with the Financial Services Authority (FSA) are over, which traders reckon could be next week. The first quarter trading update will be published at the same time.Pru maintained that completion of the deal is still on course for the third quarter of 2010, and said other regulatory and anti-trust approvals are progressing as planned."The work completed since 1 March with the AIA and Prudential teams has convinced me more than ever that the enlarged group will be in a position to capture sustainable and highly profitable growth and will deliver substantial long term value for our shareholders," said chairman Harvey McGrath.But confidence in Pru's management and chief executive Tidjame Thiam (pictured) has been rattled by today's blunder, leaving shareholders questioning whether they should back a deal that the FSA clearly has issues with.Biggest shareholder Capital Group, with 12% of the business, is rumoured to oppose the acquisition, instead preferring a break-up of the insurer.Analysts at City broker Panmure Gordon thinks the problem may relate to the ultimate outcome of the UK business which appears to be suddenly up for sale, although that may not be bad news. "This is all very unfortunate, but we may see the share price move forward on the basis that if the deal doesn't take place Pru may well be in play," it saidClive Cowdery's insurance investment vehicle Resolution is thought to have cobbled together enough money to launch a fresh bid for Pru's UK assets, possibly worth as much as £5bn.