March 8, 2010 / 7:27 AM / 7 years ago

UPDATE 3-UK's Prudential aims to widen cash-call appeal

* Says aiming for Hong Kong listing prior to rights issue

* HK investors eligible to take part in rights issue

* Rationale for deal lacks detail - investor

* Shareholder approval "not a given" - analyst

(Adds analysts' reaction, background)

By Myles Neligan and Raji Menon

LONDON, March 8 (Reuters) - Insurer Prudential (PRU.L) took steps on Monday to underpin its record-breaking rights issue by bringing forward plans for an Asian listing, while also starting to meet sceptical investors in Britain to explain the deal's merits.

London-listed Prudential, which wants to raise $21 billion to help fund a $35.5 billion takeover of AIG's (AIG.N) Asian business, said it would list in Hong Kong before the rights issue in May.

Monday's move by the Prudential, which had previously said only that it would float in Hong Kong "in due course", will broaden the pool of investors who can take part in the rights issue, the biggest ever acquisition-related cash call.

News of the accelerated Hong Kong flotation came as Chief Executive Tidjane Thiam prepared for meetings aimed at winning over existing shareholders, amid complaints from some that the company has not done enough to explain its plan.

BIG MONEY

"We are being asked to put up an awful lot of money for something that they are not willing to quantify at what stage we are going to get a decent return on capital, and that's the killer for us," said one top ten investor.

"I very much doubt that anything Tidjane Thiam will say will convince me," said the investor, adding that a substantial shareholder vote against the deal was nonetheless unlikely.

Bank of America Merill Lynch analysts said bringing forward the Hong Kong listing might reassure existing shareholders that they will not have to finance the deal by themselves, but warned that the takeover could still run into significant dissent.

"Shareholder approval of the deal should not be seen as a given. We think the prospects of gaining 75 percent approval are finely balanced," analyst Blair Stewart wrote in a note.

"Quite simply, some feel that Prudential is asking its shareholders for too much money."

Prudential has said the deal will deliver $340 million in cost savings per year by 2013, but has provided few other details, and has yet to set a price for its rights issue.

Asian investors joining Prudential's shareholder register are expected to include many who were lining up to take part in the proposed initial public offering of AIG's Asian business, abruptly ditched earlier this month after AIG accepted a takeover offer from the British insurer instead.

ASIAN MAKEOVER

Prudential wants to attract Asian shareholders as the deal, the insurance sector's biggest ever acquisition, transforms the 162-year old British life company into a largely Asia-focused business, giving it a major foothold in one of the world's fastest-growing financial services markets. [ID:nNLDE6200C]

Prudential's share price was up 0.4 percent at 522 pence by 1502 GMT, when the FTSE 100 .FTSE was 0.1 percent higher and the STOXX European insurance sector index .SXIP was up 0.2 percent.

The stock fell about 14 percent last week as investors fretted about the dilutive impact of the rights issue.

Prudential said no new shares would be offered as part of the Hong Kong listing and added that it had hedged against currency fluctuations as it prepares to exchange the sterling-denominated proceeds of the rights issue for dollars to pay for AIG Asia.

Selling the Asian business will allow AIG, which received a $182.3 billion government bailout two years ago, to pay off a big chunk of its debt to the U.S. taxpayer.

AIG on Monday sold its Alico international life insurance unit to MetLife Inc for about $15.5 billion, helping it reduce its debt further. [ID:nN08154999] (Editing by Greg Mahlich)

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