Aviva 'still chasing the Pru'

Norwich Union owner Aviva was today said to be planning to bolster its pursuit of Prudential after its rival rejected a £17bn (€24.5bn) takeover bid.

The Sunday Times said Aviva chief executive Richard Harvey will this week go direct to Prudential investors to encourage them to back his proposal to create a £34bn (€49bn) global life and general insurance giant.

The Pru rejected Aviva’s initial offer – thought to be worth 700p a share - insisting that “the possible combination of the two companies” was not “in the best interests of its shareholders”.

Prudential chief executive Mark Tucker was said to have been offered a senior roll in the enlarged group with the balance of power evenly split between the two companies.

But the Sunday Telegraph said the Pru’s board was unlikely to entertain a merger proposal even if Aviva came back with an improved offer.

Mr Harvey is now said to be planning to woo Prudential investors. However, if he fails to win sufficient support it is likely he will drop the proposal as he does not want to make a hostile bid, according to reports.

The big shareholders who will decide whether the deal is workable and have holdings in both companies include UBS, Schroders, Merrill Lynch and Legal & General.

Aviva, the UK’s largest insurer, is understood to have approached its biggest rival on Thursday but today declined to elaborate on the Pru’s statement.

Speculation about a tie-up between the two companies has persisted since the beginning of the year, and last week’s approach could flush out more bidders with Axa said to be interested.

Shares in Prudential rose 7% to 672p on Friday while Aviva was up 3% to 850.5p as rumours of the bid circulated the City.

A combined Aviva-Prudential group would have more than 50 million customers, 80,000 staff and £350bn (€504bn) of funds under management – and put it in a position to rival European giants such as Axa and Allianz.

The Pru is attractive to Aviva because there is little geographical overlap. Both have operations in the UK but Aviva is strong in Europe while the Pru has a presence in the United States and Asia.

Last week, the Pru lifted annual operating profits by 33% to £1.71bn (€2.45bn). Earlier in the month, Aviva revealed its best-ever performance in general insurance and smashed City expectations with a surplus of £2.9bn (€4.1bn).