Prudential Plc rose as much as 3.9 percent in London trading, the most in four months, after the Times reported the company’s biggest shareholder is in talks with investors about a possible breakup of the insurer.
Prudential climbed 1.4 percent to 553.5 pence as of 11:26 a.m. in London, giving the company a market value of about 14 billion pounds ($21.5 billion). The 30-member Bloomberg Europe 500 Insurance Index was down 1.3 percent.
Capital Group Cos. has held discussions with Aviva Plc, Resolution Ltd. and an unidentified party about splitting up the U.K.’s biggest insurer, the London-based Times reported, without saying where it got the information. Prudential Chief Executive Officer Tidjane Thiam needs 75 percent of investors to back a rights offer to fund a $35.5 billion agreed takeover of AIA Group Ltd., American International Group Inc.’s main Asian unit.
“We can see the logic for the argument in so much as the acquisition price of AIA implies that Pru’s own Asian operation is seriously undervalued,” said Barrie Cornes, a London-based analyst at Panmure Gordon & Co. with a “hold” rating on the stock. A breakup of the insurer could be worth about 955 pence a share, he said.
The three potential buyers haven’t shown immediate interest in the plan, according to the report. Capital Group, Aviva and Resolution declined to comment.
Prudential spokesman Ed Brewster also declined to comment on the newspaper report, adding that the company has had “constructive meetings with our shareholders” about the planned rights offer. The insurer is scheduled to publish a prospectus for the deal on May 5.
British investors including Brown Shipley & Co. Ltd. and Killik & Co. have questioned the price being paid for AIA, which would be the biggest acquisition in Prudential’s history. Prudential is planning to list its shares in Hong Kong and Singapore to expand its shareholder base in Asia before investors vote on the takeover, which is scheduled for May 27.
“Having recently met a number of Prudential’s shareholders, we are surprised at the level of concern about the proposed acquisition,” Marcus Barnard, a London-based analyst at Oriel Securities Ltd. with a “sell” rating on the stock, wrote in a note dated today. “Shareholders are concerned about the lack of information and detail about exactly what they are buying.”
Resolution, the buyout firm founded by Clive Cowdery in 2008, plans to build a U.K. life insurer worth about 10 billion pounds through acquisitions. The firm, which aims to make two purchases in the next 18 months, would be interested in buying Prudential’s U.K. unit if the report is true, Cornes at Panmure Gordon said.
Aviva, the U.K.’s second-biggest insurer, may want to purchase Prudential’s Jackson National Life U.S. unit, he said.
Capital owns 305 million shares in Prudential, or a 12.04 percent stake in the company. The investment firm increased its holding from 301 million shares, or 11.9 percent, on April 8, according to a regulatory filing.