atans1

AIA takeover is nuts, PRU shareholders advised

In GIC, Insurance, Temasek on 26/05/2010 at 6:45 am

RiskMetrics, an international share proxy advisory service, issued a critical assessment of the AIA takeover bid, saying while a deal had “a sensible strategic rationale”, Prudential was paying a heavy price.

FT reported that RiskMetrics said Prudential was paying US$35.5bn for a company with US$1.6bn in post-tax operating profits.

“For this to work, profits have to grow substantially beyond the expected cost synergies. Our analysis indicates that Prudential needs very high growth rates at AIA to only meet a reasonable return on invested capital, something that seems a stretch when managing a difficult integration process.”

Let me know when our local media report this story.

BTW GIC’s interest in this stock shows that its analysis is different: it is willing to forgo jam today for  jam tomorrow (maybe).  Hmm must be MM’s 30-yr view at work. Wonder who is right.  Remember shortly after he last said this , Temasek sold its BOA stock, just before the market recovered. GIC held on to its UBS and Citi investments.

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