Prudential (UK) Rejects Aviva Bid

March 20, 2006

It may still be wintry and cold in London and Minnesota, but that hasn’t seemed to dampen the springtime ardor for big merger plans. Shortly after speculation rose that St. Paul/Travelers was seeking to merge with Swiss-based Zurich Financial Services (See related article), Aviva Plc, the UK’s largest insurer, was reportedly seeking to acquire Prudential U.K., Britain’s second largest life company.

The widely reported bid of around 700 pence ($12.30) a share (the Pru’s shares have been in the 650-660 range) makes the bid worth over £17 billion (nearly $30 billion) and would create a global financial services behemoth.

Prudential’s Board of directors lost no time, however, in both affirming that it had received an offer from Aviva and rejecting it. On Saturday March 18, it issued the following statement: “Prudential Plc announces that it received a proposal from Aviva Plc about a possible combination of the two companies. The Board of Prudential Plc, which has taken independent financial advice, does not consider that the proposal is in the best interests of its shareholders and has rejected it.

The Board confirms that it is not in discussions with any party and reaffirms its confidence in Prudential’s future as an independent company.”

Will that be the end of Aviva’s efforts? Probably not. The Pru is a tempting target. Last week it announced a 33 percent increase in 2005 operating profits to £1.712 billion ($3 billion), substantial new business and an upbeat forecast for the future.

The Company’s principal U.S. subsidiary, Jackson National Life, is part of the temptation. Commenting on its 2005 results, Mark Tucker, Group Chief Executive noted that it was a “a significant cash generative business with competitive advantage in the key growth sectors in the market. JNL’s strength in variable annuities, its ability to bring products to market rapidly and its positioning in advice-based distribution channels means it is very well placed to take advantage of the significant retirement savings flows expected from the ‘baby boomer’ generation over the coming years.”

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