Probe Launched Into Prudential’s Failed AIA Bid
An investigation is under way into the handling of Prudential’s $35 billion aborted bid for Asian life assurer AIA, according to people familiar with the matter.
The London-based insurer was ordered by the UK financial watchdog to commission law firm Clifford Chance to conduct an inquiry because of concerns about the management of the AIA deal, the people added.
The external “skilled persons report” is focusing in particular on the Pru’s investment bank advisers, Credit Suisse , JPMorgan and HSBC , and whether they discharged their duties properly.
Such investigations — called Section 166 reports because of the regulatory code section that authorizes them — can result in recommendations for changes to procedures and policies at the companies involved. They can also lead to enforcement action by the watchdog, the Financial Services Authority.
Last year, the UK regulator ordered a record 140 companies to commission such reports.
The Pru’s agreed bid for the Asian life assurer AIA was beset with difficulties, especially on communication issues, from its launch in March last year.
Investors had to wait for more than two months from the day the deal was announced until they were able to see the full financial details, at the launch of a $20 billion rights issue intended to help fund it.
The launch of the rights issue was itself delayed last May after the FSA demanded that the combined group should hold more capital than planned, which forced a restructuring of the financial terms.
The deal ultimately failed after Pru shareholders forced the company to renegotiate the price. This was agreed by the management of AIG , which then owned the company, but was subsequently rejected by the U.S. group’s board in favor of pursuing an initial public offering in Hong Kong.
Credit Suisse led the initial negotiations between the Pru and AIG. JPMorgan joined the process later on and HSBC was brought in just before the deal was announced to help underwrite the huge financing.
The deal involved a rights issue, the issuance of new debt and the creation of separate listings in Hong Kong and Singapore.
All of the sponsors of the deal are being examined to see whether they reached appropriate standards, according to one person familiar with the matter.
The three banks, Clifford Chance, the Pru and the FSA, all declined to comment.
Additional reporting by Megan Murphy