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Pru Chairman Apologizes for Failed Takeover Bid

Source: NY Times

Posted on 08 Jun 2010

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The chairman of the insurance giant Prudential Plc apologized on Monday for the costs incurred by the failed takeover of the American International Group's Asian business, but he rejected calls for him and the chief executive, Tidjane Thiam, to resign, The New York Times's Julia Werdigier reports.

The chairman, Harvey McGrath, told investors at the annual meeting that the board “remains convinced that it was right to pursue this opportunity” and that he saw “no reason why any directors should resign.”

But some private shareholders remained unimpressed and repeatedly interrupted the meeting with shouts of “shame on you” and “you are a disgrace.” At one point, the heckling was so disruptive that Mr. McGrath had to call for order.

Prudential, which is based in London, abandoned its plan last week to buy the AIA Group from the American International Group after last-minute negotiations to lower the $35.5 billion price failed. A growing number of shareholders warned Prudential they would oppose the deal because it was too expensive.

Since then, several analysts had said the failed transaction would cost some board members their jobs and British newspapers reported Monday that some large shareholders approached a former chief executive of the British insurer, Mark Tucker, over a possible return to the helm of the company.

A shareholder, Anthony Watts, accused the board of failing “to do your job properly” and asked “why did the whole board get it so wrong?” He said “you all failed and you can’t see it.”

Mr. McGrath apologized for the £450 million, or $651 million, the company has to pay in fees and penalties for the collapsed deal and admitted that the board had underestimated some parts of the transaction, like the communication with all shareholders and the timing of the regulatory approval process.

Mr. Thiam, who became chief executive eight months ago, said he still believed that going after AIA was a “unique opportunity” and added that management was aware of the risks related to the deal. But he also said that his “efforts put a strain on our relationship with some of our shareholders.” His task now, he said, was to “restore confidence” in Prudential among shareholders. Prudential’s shares fell 3.9 percent in London Monday and 17 percent since the beginning of this year.

Mr. McGrath said the company did not have plans to spin off or sell shares in its own Asian business in the near term but is reviewing its options on a regular basis. He said Prudential would keep an eye on AIG’s plans with AIA, which might include an initial share sale.

“What we learned in this post-crisis world is that doing large cross-border acquisitions is actually going to be very difficult,” Mr. McGrath said.