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March 2010
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May 2010

An uphill battle

Prudential’s risky plan to acquire AIA looked as if it was a “done deal”.  Now things seem rather less certain (Prudential must explain AIA strategy):

The old view here was that Prudential's proposed $35.5bn (£23.3bn) purchase of AIA is very likely to complete. This was not because the deal is appealing – it's not, it looks too risky and too expensive.

Rather, it was because cold cynicism suggested that a company willing to shower $1bn in fees over the City usually gets its way.

It may be time for a rethink. A senior fund manager within the Pru's largest investor, Capital Research & Management, owner of 12%, is said to be unhappy with the deal. If that is true (the smoke signals say it is), Tidjane Thiam, the Pru's chief executive, is in trouble. He needs 75% support from shareholders to secure a green light. Without Capital, the arithmetic becomes tricky, especially as other City fund managers express in private their own misgivings.

Capital is said to prefer a break-up of the Pru. At the moment, that sounds like wishful thinking. Never mind. The deeper point is that the Pru must explain why betting the firm on one mammoth deal in Asia is an acceptable risk. To many outsiders, the best way to approach the Asian opportunity is via organic growth, where Prudential has enjoyed considerable success. Such a strategy would be lower risk, would save a small fortune in fees and would preserve the break-up option.

We wait to discover if next week's prospectus explains why this option was rejected. But Thiam needs to address the question. If he doesn't, it is easy to imagine how this tentative rebellion could become the real thing.

The Financial Times points to another big problem with this deal (Pru threatened by mass AIA defections):

With the long-awaited prospectus from Prudential just days from publication, nervousness is mounting inside AIA, the UK assurer’s $35.5bn (£23bn) takeover target.

Until a few weeks ago, pan-Asian insurer AIA, which has century-old roots across the region, was sailing towards a Hong Kong listing with a potential market capitalisation of up to $40bn. Now senior AIA executives sit silent, unable or unwilling to give their views on the Pru deal.

How many senior AIA executives, actuaries and agents remain following a takeover is extremely important for the combined group if it is to deliver the sales increase being flagged to investors to justify the price and the $21bn rights issue that will fund the deal.

To hit its growth targets, the Pru wants 300,000 new agents to increase its sales force to almost 1m. So any exodus of AIA staff would be painful.

AIA, which is owned by AIG, the stricken US insurer, has been a fierce rival of the Pru for decades in Asia, home to the world’s fastest-growing markets for life assurance.

Analysts at CLSA, the Asia-focused brokerage, this month described the situation in evocative terms. “This isn’t a friendly merger,” they said. “It’s more like parents forcing the daughter to marry someone she doesn’t like for money. The integration will be an uphill battle.”

Indeed it will - but we already knew that (Prudential bold or barmy?).  Oh, and if you can’t negotiate the FT paywall, the same story is over at the New York Times (Pru Takeover May Be Undermined by Exodus). 


The SCMP seems to have been hoist by its own petard.

img004They have a  policy of printing the Chinese characters for people and places.  And another policy of cutting costs.  The unsurprising result is that  sometimes they get things wrong.

Yesterday they somehow mixed up the Chinese characters for Chinese President Hu Jintao and another Mr Hu (Hong Kong’s SCMP Botches Hu’s Chinese Characters, Apologizes):

Instead of the Chinese characters for Hu’s name, the English-language Post printed the characters for “Hu Jia” which is the same name of a prominent mainland activist serving a three-and-a-half year jail term for subversion, Radio Television Hong Kong said on its Web site.

A spokeswoman for the paper said the error occurred due to a mistake in proof-reading carried out by an expatriate who does not understand Chinese, RTHK said.

img007  Today they have a very prominent but very vague apology, and no further mention of their blunder.

Where’s it gone?

Now TV have 9 sports channels.  However, they don’t have enough sport to fill all these channel 24 hours per day and by the time you get to channel 638 (Now Sports 8) there’s usually just a blank screen.  OK, fair enough.

But hang on, there are several Premier League games tonight.  Shouldn’t one of them be on 638 or 639?  You might think so, but actually Blackburn vs. Manchester United is on channel 898 (TVB Pay Vision Info).  This is not advertised anywhere on their website, and it’s hardly an obvious channel to try.

It’s possible that if you watched the football on Now Sports 2 they might be explaining (in Cantonese) that this game is on 898, but apart from that viewers are left totally in the dark.  Very puzzling.  

Problems, problems

Imagine for a moment that you have booked a flight and reserved your seat.  You turn up at the airport ready to check in.  You produce your passport and frequent flyer membership card.  What happens next?

(a) Check-in is complete in 3 minutes and off you go.

(b) The check-in agent gives you someone else’s boarding pass.  When you question this, agent says she couldn’t find your booking in the system.

(c) The agent prints out a boarding pass for a window seat (you requested an aisle seat).

(d) Long wait

(e) Agent discusses the problem with supervisor.  You get the boarding pass for the seat you reserved.

It could more than one of the above options.