Aviva's bid for Prudential lands Indian arm, ICICI Pru in quandary

Our Banking Bureau
20 March 2006

British insurance group Aviva's unsolicited £16.8 billion ($29.5 billion) all-stock bid for Prudential could create a problem for its Indian arm if it goes through. The alliance mooted will create the UK's largest and the world's fifth largest insurance group. Under the proposed terms, Prudential shareholders will get 83 Aviva shares for every 100 shares held.

However, any merger could create a peculiar situation for Aviva in India, one of the fastest-growing markets in Asia. While Aviva holds a 26 per cent stake in its Indian joint venture with the Dabur group, Prudential holds a 26 per cent stake in ICICI Prudential Life Insurance.

Prudential rejected the bid on Saturday, March 18, saying it was not in the best interests of shareholders, but the directors of Aviva will meet this week to consider increasing the offer amount. Aviva said today that it would proceed with the offer only if the Prudential management recommends the deal.

Aviva is not expected to launch a hostile bid. According to some analysts, though, there is an outside chance for a hostile bid if it fails to convince the Prudential management.

There is also speculation that bigger rivals like AXA of France, Allianz of Germany or even American International Group could come up with rival bids. AXA and Allianz have separately denied any such moves.

Aviva is the world's sixth largest insurance group and the single largest in the UK. It offers life and general insurance, long term investment solutions and fund management services. The group had more than $510 billion in assets under management and had revenues of $57 billion from insurance premium and investment sales.