Pru's £14.5bn cash call at 80% discount; Group commits to UK

Prudential has revealed the terms of its £14.5bn cash call, with the issue price set at more than an 80% discount to the insurer’s closing level on Friday.

The cash call will comprise of 11 new shares for every two existing shares at an issue price of 104p per share for UK shareholders.

Pru's issue price represents a 39.3% discount to the theoretical ex-rights price based on the closing price of 542.5p on 14 May and a 80.8% discount to this close.

While Prudential was widely rumoured to be looking to offload its UK and US arms, the group says it intends to organise its business into four broad divisions: Asia, UK, US and asset management (including M&G).

The group originally planned to unveil its rights issue two weeks ago, but was forced to delay the announcement by the FSA on capital concerns. In response, Pru has revised its debt financing arrangements to include a facility for $5.4bn of hybrid capital and a standby commitment from AIG to subscribe for up to $1.875bn of hybrid capital.

Pru, which needs 75% of investors to approve the rights offer at a shareholder vote, will find life difficult, with investors such as Neptune's Robin Geffen against the deal.

However, Pru CEO Tidjane Thiam says the deal allows the group to take a leading position in many of the most attractive markets in the world.

"The combined business will be in an excellent position to capture sustainable and highly profitable growth," he says.

"We have the team, the skills and the discipline to successfully integrate these businesses and achieve the targets we have announced today.

"We believe that, through capital management and portfolio rationalisation, there will be opportunities for the combined entity to create additional shareholder value over and beyond the revenue and cost synergies identified."