M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Monday, June 7, 2010

Pru: Lesson Learned?

UK insurance company, Prudential had a shareholder meeting today in the wake of its failed bid to buy AIA.  Let's just say it wasn't pretty:

Shareholder Anthony Watts summed up the feelings of many when he described the affair as "a shambles from start to finish" and "a disgrace".

"You failed to do your job properly, all of you. All of you are responsible for this failed deal," he told directors, saying they should "do the honourable thing" and resign.

His comments, and many more like them, drew loud applause during a stormy affair that showed just how far the insurer's reputation with its investors has fallen. Directors, who glowered at the assembled band of as many as 300 predominantly small shareholders, were accused of being "smug" and "arrogant" at the meeting, held at the Queen Elizabeth Centre in Westminster.

 It was pretty clear that management had learned its lesson and was appropriately contrite:

 [C]hairman, Harvey McGrath, told shareholders at the annual general meeting in London, where several shareholders expressed their anger over the AIA bid. "One of the lessons we've learnt is that in the post-crisis world we live in, doing large cross-border acquisitions in financial services is going to be very difficult," McGrath said. "I think we'll continue to seek to grow this business organically. You should expect us to look at bolt-on acquisitions."

Buying AIG's Asian unit in the aftermath of the Financial Crisis and AIG's collapse was a bold move.   Had it worked, it might have been a game-changer for Prudential, giving access to markets throughout Asia (though not much in China).    But when bold moves don't pay off, they can be risky for the guy at the top.  This failed transaction cost Prudential approximately $600 million (termination fee and expenses) to walk away from. It also generated a host of shareholder anger that was on display today.  

There's lots of talk that Prudential's CEO, Thiam, may be shown the door for his miscalculation.   I suppose someone should pay for a $600 million mistake. 

-bjmq


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