Pru delays rights issue over wrangles with FSA

Prudential has delayed the issue of details of its $21 bn cash call, because it has failed to reach agreement with the FSA on its capital position.

In a statement the life company said it is in continuing discussion with the regulator regarding the transaction, in particular in relation to the capital position of the Enlarged Group under the Insurance Groups Directive.

It states: "As a result, Prudential has decided to delay the pricing and launch of the Rights Issue whilst it seeks to bring its discussions with the FSA to a conclusion."

Prudential now expects to price and launch the Rights Issue, and publish the Rights Issue Prospectus and New Prudential Prospectus, once discussions with the FSA are concluded.

However the life company says other regulatory and anti-trust approvals are progressing as planned, and it does not expect the delay to affect the overall timing for the completion of the transaction set out on 1 March 2010.

This timetable set out the publication of the prospectuses and circular in April / May, followed by Prudential shareholder meetings to approve the Rights Issue and the Transaction in May.

In the same month, the life company expects the Rights Issue trading period to commence, with the Rights Issue trading period ending in early June.

By Q3 2010, Prudential anticpates regulatory approval and the close of the acquisition with proceeds and vendor consideration released to AIG.

At that time Prudential will be delisted and New Prudential listed and admitted to trading on the London Stock Exchange.

Prudential chairman Harvey McGrath says: "We are entirely committed to the transaction and remain on track to complete within the timing set out on 1 March.

"The work completed since 1 March with the AIA and Prudential teams has convinced me more than ever that the enlarged Group will be in a position to capture sustainable and highly profitable growth and will deliver substantial long term value for our shareholders."

The company needs the cash to help fund its $35.5bn acquisition of AIG's life insurance arm AIA.

"There are still issues being ironed out by regulators, the deal is under greater scrutiny," the source told Reuters, asking not to be identified.