Wednesday newspaper round-up: Prudential scraps AIA deal, BP

Wed 02 Jun 2010

LONDON - Prudential on Wednesday said it had decided to walk away from an agreement to buy AIG’s Asian business after the board of the US insurer voted against cutting the purchase price from $35.5bn, the FT reports.

Prudential said in its statement that terminating the agreement with AIG would cost it £152.6m ($225m) in break-up fees. Advisory, underwriting and other fees related to the planned transaction would add another £297.4m. The British insurer said it would scrap a deeply-discounted $21bn rights issue designed to fund the acquisition.

AIG’s board voted 10-2 against a proposal to cut the price of AIA to $30.375bn. Instead, it favoured reviving plans for a partial sale of AIA in an Asian stock market listing, the FT adds.

The Times reports that Prudential was last night facing shareholder calls for a boardroom clearout and a full strategic review after the insurer’s $35.5bn bid for AIA in Asia collapsed over price. Three of the Pru’s biggest institutional owners said that the position of Tidjane Thiam, the chief executive, was untenable after the insurer failed to negotiate a last-minute cut of $4.6bn to the AIA bid price. They said they expected Thiam, the architect and the driving force behind the Pru’s ambitious Asian expansion drive, to resign within weeks, the Times reports.

BP’s long-term credibility was at stake last night as its chief executive fought to halt a headlong slide in its stock price and the Obama Administration announced a criminal investigation into the Deepwater Horizon oil disaster. After losing a third of its value in six weeks, BP is expected to promise shareholders this week that their annual dividend — more than $10bn last year — will be maintained. Eric Holder, the US Attorney-General, announced a criminal and civil investigation, to be conducted by the FBI and other federal agencies, after meeting local officials in New Orleans, the Times reports.

Activity at British factories increased at the fastest rate in more than 15 years in May, matching April’s rate of growth, but the data was clouded by fears over inflationary pressures. The Purchasing Managers’ Index of activity at British manufacturers remained at 58 in May, the highest since September 1994. It has been above the 50-mark, which indicates that activity is rising rather than falling, for eight months as manufacturers take advantage of the weak pound to boost exports, the Times reports.

The European Union could seize control of green taxes across the continent in order to make low-carbon energy cheaper. Biofuels and wind or wave power would become less costly than energy produced from fossil fuels, under draft plans obtained by Reuters, reports the Telegraph.

The Takeover Panel has launched a review of the rules governing mergers and acquisitions in the wake of Kraft's £11.7bn purchase of Cadbury earlier this year. The public consultation could lead to major changes in takeovers in this country, including raising the minimum acceptance threshold beyond "50% plus one" and restricting the fees paid to investment bankers, the Independent reports.

Yukio Hatoyama, Japan prime minister, on Wednesday announced his resignation along with ruling Democratic party heavyweight Ichiro Ozawa to take responsibility for recent fundraising scandals and the mishandling of a US marine base relocation plan.The departure of the prime minister less than a year after he led the Democratic party to a historic general election victory over the long-ruling Liberal Democratic party could have far reaching implications for the development of Japanese politics, the FT reports.