Prime CFDs in the Press - Prudential (PRU)

Tidjane Thiam will be fully aware of what happened to Jonathan Bloomer, the last Prudential chief executive to turn to shareholders for cash.

Although Mr Bloomer managed to raise the £1bn he wanted to fund the company's UK growth in 2004, he was ousted months later after investors cast him as a blunder-prone liability.

The current man at the helm will be desperate to avoid a similar fate and will need to give the performance of his career if he is to get the insurer's stuttering $35.5bn (£24.5bn) takeover of AIA back on track. He has just over two weeks to sell his dream to shareholders, who will decide both the bid and Thiam's fate on June 7. On the vote that day they will either make FTSE 100 history by shooting down management, triggering an inevitable raft of resignations, or by approving the record £14.5bn rights issue on which Prudential's deal hinges.

Thiam began his desperate courtship of the City yesterday by putting the detail onto the bones of a plan that shareholders have been waiting 11 weeks to see. First impressions were not what Thiam would have wanted.

"We and other shareholders believe the price is too high and the financial case for the deal hasn't been particularly well articulated, so I think they are going to have a difficult task getting this deal through," David Cumming, head of UK equities at Standard Life, told the BBC.

"We're not clear in terms of the strategy in terms of the UK business and some of the Asian businesses they're buying, so we need a lot more new information and we are sceptical."

Thiam has been itching to reveal more detailed numbers to investors since Prudential first stepped out with AIA on March 1, and on that front he did score a hit. AIA's first quarter profits rose 32pc, he disclosed, and its European embedded value (EEV) – a measure of future profits – jumped from $21bn to $22bn in a matter of weeks. Rather than being cash-consumptive for the years ahead, as many investors fear, he claimed AIA would throw off $1bn annually from 2011, contributing to the group dividend.

"These businesses are absolute gems," one insider said. "And the figures show that we're buying AIA at an inflection point, with all the upside to come." At least one analyst was wooed. Prime CFDs, a broker, said: "The numbers clearly illustrate there is plenty of positive cashflow on offer."

Thiam threw what other gifts he could at investors, pledging to increase revenue synergies by $100m to $800m and adding $30m to cost synergies, lifting them to $370m. But the combined benefit was more than offset by the £110m additional cost of financing the deal demanded by the regulator. A 2pc sub-underwriting fee for institutions, totalling $420m, may be more generous than the 1.75pc in rival rights issues, but it will not decide the vote.

Ultimately, though, winning over investors will come down to one thing alone. Can Thiam and his team convince them that the Asian dream is not just a mirage? Paul Mumford, fund manager at Cavendish Asset Management, captured the fears, noting: "This is something of a leap in the dark for the Pru. This is not about business diversification – this is a case of putting an awful lot of eggs into a Far Eastern basket."

Asset disposals in India and China, where the company faces regulatory restrictions, may sweeten the offer. And there is the ever-present prospect of a sale of the reliable old UK business to help fund the Asian romance, though Thiam did not drop any firm hints yesterday.

"It's something we always have in our mind when we have strategic reviews, but that stands for any part of the business. Nothing is sacred, it's all about getting shareholder value," he added.

Thiam is most at home lost in the numbers, but he will need more than statistics to dazzle the City. Investors are still not convinced he has the experience or temperament to execute the deal. Thiam has not done himself any favours since the bid was unveiled and, speaking yesterday, admitted the AIA takeover process had begun badly.

"We were a bit like a fighter with one arm behind his back," he said. "We were handicapped, we weren't able to answer a lot of questions, which was frustrating for our shareholders."

Giving insititutions just 45 minutes of the company's time on the first day of meetings did not go down well and has led to charges that he is aloof and arrogant. Responding yesterday, he said: "You can never argue with perception, but if that's what they're saying then I regret it. We have called up and apologised. Ultimately I am accountable for these things."

He added that the embarassing delay in launching its rights issue was another blow as the company struggled for approval from the regulator.

A veto from shareholders on June 7 and Thiam would almost certainly follow Bloomer in departing from the company early, which would be a stunning reversal of fortunes given the wave of optimism when he took over from Mark Tucker last October.

Asked if he would resign in the event of this happening, he refused to answer. However, Harvey McGrath, Prudential chairman, said: "It is a vote of confidence in the deal, not it's management. If it doesn't get passed then I would take a view of unfolding events as they presented themselves."

Whatever happens, the next few weeks will prove to be the most pivotal of Thiam's career.

Telegraph

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