UK – A roughly £440bn (€634.5bn) asset pot could be created if Prudential were to accept Aviva’s £17bn takeover bid – establishing a British life assurance and asset management powerhouse.
Aviva’s £291bn asset management arm, Morley Fund Management, could merge with Prudential’s £149bn M&G Investments under Michael McLintock. Roughly 85% of Morley's assets are classified as 'institutional business', amounting to £126bn. M&G did not respond to questions regarding its institutional assets.
The €2.9bn Tesco Pension Scheme and the National Health Service pension scheme are among several funds which could be affected by the move.
“We run over 4,000 corporate pensions and service 20% of the FTSE 350 companies,” a Prudential spokesperson told IPE.
“We provide teachers and over half of all local authorities with pension schemes and are a joint pension provider to both the NHS and the UK Civil Service. A number of other significant schemes have also been won for clients such as Tesco, UTC, Thales Optics and Borders.”
Colin Morton from Leeds-based Rensburg Sheppards, which holds both Aviva and Prudential shares, said: “They are both well known but M&G also has a fantastic brand name in the market place. They might decide to merge Morley into M&G.”
He added: “Or they might to decide to keep them as stand-alone entities.”
Commenting on a possible tie-up between M&G and Morley, an M&G spokesperson said: “Obviously there is very little on which we can comment on at present except that business at M&G continues as usual and our focus remains on delivering exceptional returns for our clients.”
According to some market commentators, Prudential brings with it exciting growth areas. It has been described as “well ahead of most other insurers” when it comes to exposure in Far Eastern markets – labelled “an exciting place to be in long term”.
Meanwhile, Aviva is seen as having a large amount of free cash flow but not much growth opportunity.
According to industry analyst Ned Cazalet, Prudential’s initial rejection of Aviva’s offer is not related to price. Instead, the two firms operate in “substantially different” markets with different views on how to do business.
“They are not similar businesses at all,” he added. “You might call them chalk and cheese (a slight exaggeration).
“The Pru is saying that it is rejecting the Aviva bid on the grounds that the Prudential can jolly well continue its business on its own terms,” he added.
Industry analysts also added that Aviva’s position could also make it a possible takeover target.