Aviva calls off bid on Prudential

Aviva calls off bid on Prudential

	Published : Sat, 25 Mar 2006 08:10 By : Andrew Stead Print this Story

LONDON: Insurer Aviva Plc. called off its 17-billion-pound all-share bid for rival Prudential Plc. Friday. The company, Britain's largest insurance company, said prospects of a future deal were "very low" although it intended to continue its acquisition efforts in order to further consolidate its position.

Aviva said it took this decision as it failed to convince Prudential's board and because it thought not in its shareholders' interests to improve on the offer.

The company said it will reconsider its offer if Prudential changed its mind over its proposal, or if another party made a bid. Chief executive Richard Harvey, however told pressmen there is little chance of reviving the proposal.

In a statement to the stock exchanges, the company said it had made clear that its proposal was dependent on the cooperation of Prudential. "As this cooperation has not been forthcoming, Aviva has decided to withdraw its proposal."

A merger of the two would have created a global insurance major worth 35 billion pounds, becoming the fifth largest insurer in the world.

Analysts felt Aviva's shareholders were not keen on a deal of this nature and that is one reason the company backed out so soon -- in a matter of five days. Aviva had proposed to offer 82 Aviva shares for every 100 Prudential shares, which is equivalent of 708 pence for a share of Prudential, a 10 per cent premium on Prudential's share price on 16 March when Aviva came out with the offer.

Prudential issued a statement in reaction to the report saying it was always confident of its independent identity.

Some analysts are of the firm opinion that this is a strategic retreat by Aviva in order to show to Prudential shareholders what will happen if the premium offered is removed. It could now turn out to be a hostile process, they believe.

There are rumours that insurers like Axa of France and AIG of the United States are eyeing Prudential.

Prudential shares ended down 4.8 per cent at 681 pence, while Aviva climbed 1.2 per cent at 831-1/2 pence.