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JSM Financial: Shareholders call for Prudential bosses heads as AIA deal stalls.
The failed takeover of AIG's Asian insurance unit will cost Prudential hundreds of millions.
By: JSM Financial
The move by Prudential to pull out of the deal was largely expected after the bailed-out AIG refused to cut the asking price for AIA , snubbing a last ditch attempt by the British insurance giant to appease their shareholders who said that they would not vote for the deal as the price was too high.
"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach agreement,” JSM Financial believes the company’s chairman, Harvey McGrath, said in a recent statement. "We are therefore withdrawing from the transaction."
With the bill for thew failed transaction running into the hundreds of million investors have called for both McGrath and the firms CEO Tidjane Thiam to step down. Despite having relied heavily on a legion of advisors and experts the two, both with less than 18 months in their positions, are accused of failing to read the appetite for risk of the Prudential shareholders and of deciding to press ahead with the costly bid process despite the lack of backing shown by the firms investors, JSM Financial was told.
The cost of the aborted acquisition is thought to be in the region of £450 million ($653.8 billion) which includes a break-up fee, the impact of currency hedging and other costs.
"They have incurred a net 450 million of costs, after the effect of currency hedging which would probably have given them between 300 and 500 million of pounds -- so you have basically spent 750 million to a billion pounds of shareholders' money and you have nothing to show for it. It's a tough one." JSM Financial believes an analyst at Oriel Securities recently commented.
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JSM Financial is an independent broker focused on the realization of superior returns from seed stage and early-stage equity investment and active partnerships with exceptional entrepreneurs building market-leading technology companies.