Prudential taps Asia sovereign funds over AIA deal
British insurer Prudential is tapping sovereign wealth funds in China and Singapore to help finance its 35.5 billion dollar buyout of US insurance giant AIG’s Asian arm, a report said Tuesday.
The Financial Times quoted unidentified sources as saying that Prudential and its advisers were in talks with the sovereign wealth funds to support a planned 20 billion-dollar share offer for AIA.
It said the Singaporean and Chinese sovereign wealth funds had not made a final decision but their response was positive.
Singapore’s Temasek Holdings and China Investment Corp (CIC), among the region’s major sovereign wealth funds, would not comment on whether they had been approached by the British insurer.
“It is inappropriate for us to comment on market speculation,” a spokeswoman for Temasek Holdings said in a statement to AFP.
A CIC spokeswoman said the fund has seen the newspaper report but added it was company policy not to comment on rumours.
Asked about its market strategy, the CIC spokeswoman said: “As an investment institution, we make financial portfolio investment and seek medium- to long-term, risk-adjusted returns at a reasonable level. These have been the principles we always follow.”
Prudential on Monday agreed to buy AIA for 35.5 billion US dollars in the insurance sector’s biggest ever takeover.
The acquisition of AIA will transform Prudential into the world’s top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.
Under the acquisition terms, the British firm will pay AIG 25 billion US dollars in cash and the remaining 10.5 billion US dollars in new Prudential shares and other securities.
The Financial Times said Prudential is planning a rights issue of 20 billion US dollars, giving existing shareholders in the British insurer the right to buy the shares first.
Should the shareholders decide not to take up the offer, the sovereign wealth funds will then invest in the offering, it said.
Prudential’s group chief executive Tidjane Thiam said that Asia is the “most attractive opportunity in our industry today”, partly because of the region’s strong savings habits.
“Asia is the engine of the group’s future growth, particularly the fast growing economies in Southeast Asia,” he said.
“Asia is complex, dynamic and exciting, and its economies differ significantly, with varying levels of economic development, from the OECD members, Japan and Korea, to the fast growing markets of Southeast Asia, such as Indonesia and Malaysia.”
Sales in Asia already make up half of new contracts for Prudential across a number of countries including China, India, Indonesia, Malaysia and Thailand. The company also has a strong presence in Britain and the United States.