AIG takeover underlines Pru chief Tidjane Thiams ambition

By Jamie Dunkley and Philip Aldrick Published: 5:59AM GMT 02 March 2010

Prudential

Yet, with a debate of Middle East subsequent on the bulletin and the small charge of credible investors to behind a $21bn (�14bn) rights issue, he"s doubtful to be shortening his nap necessity soon.

Prudential"s $35.5bn (�23.8bn) suggest for the Asian resources of the beleagured opposition AIG could emanate the largest general word organisation in Middle East and settle the association as one of the world"s heading monetary institutions.

Prudential arch Tidjane Thiam is receiving the risk commercial operation to a total new impassioned Prudential advisers in line for jot down $1.3bn fees Tidjane Thiam: Pru difficult man has the appeal to win by AIG to make use of Asian sale deduction to compensate off state debt Prudential shares plunge on understanding for AIG"s Asian arm Prudential buys hold up word commercial operation in Middle East

The scale of the understanding is outrageous and shows how desirous Mr Thiam indeed is. The 47-year-old father-of-two is about to enter upon on the largest rights issue in UK batch marketplace story to one side the greatest word takeover ever attempted by a British association all inside of the initial five months of his power as Prudential"s arch executive.

Britain"s largest word organisation resurrected the bid for AIA towards the finish of last year. This was not a new theme for Mr Thiam, who as financial executive had stood corresponding with his prototype Mark Tucker as Prudential attempted to buy the commercial operation in late 2008 and early 2009.

Mr Tucker"s mental condition was to emanate an Asian superpower. In AIG, he found the undiluted target, a once strong association with a heading Asian section that had run in to horrible difficulties at organisation level. AIG had been discovered by the US supervision dual days after Lehman Brothers was authorised to destroy in a move that would in the future see $182bn of taxpayer supports pumped in to the association in lapse for an 80pc stake.

The Tucker understanding foundered since the US Federal Reserve longed for to recover, in cash, the AIG investment. With Prudential"s shares trade at about 200p, a rights issue was not going to occur and the insurer would not be means to lift the cash. Reluctantly, Mr Tucker had to desert his plans.

This time around, though, the conditions were better. In December, AIG afterwards meditative about floating the Asian arm got behind in hold with Prudential, that had never done a tip of the enterprise to do a deal. By bringing Prudential in, AIG was operative a "twin track" routine that gave it the choice of a sale.

What sloping the balance? "We came up with a tonne of old fashioned cash," one source said. AIA government still elite the inventory but the Fed, penetrating to get the hands on $16bn it is owed, could not conflict the captivate of hard-baked money in a still flighty market.

For Prudential, it is maybe the boldest move of the 162-year history. To financial the deal, it will launch a rights issue that some-more than doubles the marketplace worth and quadruples the share capital. Analysts design the issue to be labelled at around 140p, a 40pc bonus to the fanciful ex-rights cost of 230p and a 75pc bonus to Friday"s close of 602p.

Shareholders will be offering 4 new shares for each one they hold, creation it proportionately a far incomparable fundraising than possibly Lloyds Banking Group or HSBC the subsequent largest issues. They will be serve widely separated by the issue of an additional $5.5bn in new shares to AIG and $5bn of hybrid debt instruments. A serve $5bn of comparison debt is being lifted to account the purchase. By any measure, the understanding is "transformational".

It will be a big ask of the financier bottom but a handful of large shareholders are thought to be understanding in principle. Robert Talbut, arch investment military officer at Royal London Asset Management, that binds a sub-1pc interest in Prudential, said: "This is the sort of understanding that should be backed. Putting UK businesses in universe heading positions in expansion markets is something UK investors should be encouraging."

Mr Thiam will acquire all the support he can get. Before receiving over as arch executive, he pronounced he had no plans to shift the company"s strategy. Five months in and he"s move at a silly pace.

Asia binds most promise. Mr Thiam has identified the segment as a "sweet-spot" and resolutely believes that a understanding with AIG will feat this. Rising resources and low marketplace invasion meant countries opposite the segment are high expansion areas.

Prudential binds a market-leading on all sides in 7 of the thirteen Asian countries it operates in, with Prudential Corporation Middle East delivering �713m in new commercial operation increase for the company, according to the ultimate results.

AIA additionally operates in this "sweet-spot", holding a heading on all sides in 6 out of the fifteen Asian countries it is formed in. These embody countries such as Thailand and the Philippines, where Prudential is penetrating to enhance the business.

This morning, Mr Thiam will enter upon on a debate of Middle East with his AIG reflection Robert Benmosche in an try to win the hearts and minds of workers at AIA, that will infer necessary since the actuality that a little pursuit waste in the segment are expected - as referred to by Prudential"s programmed $340m of annual cost savings.