Thursday, March 04, 2010

Prudential buying AIG?

Prudential's market capitalisation - about GBP12.3billion (about USD18.5billion)

Purchase price - USD35.50billion

The biggest reason for Prudential to buy - rapid increase in access to a rapidly growing Asia market.

How to pay?
USD$25billions in cash and the rest in Prudential shares

Where to find USD$25billion cash?
- rights issue of USD$21billion ie. issue more shares to existing shareholders
- borrow USD$5billion

Impacts and consequences?
Marcus Barnard said - 3 times increase in the number of shares with only 60-70% increase in contribution from AIG (for now) (thus massive dilution expected for now)
Is Prudential buying at too high a price given the current weak European currencies against USD?

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