Thiam under threat for AIA overreaching

Published on Wednesday 2 June 2010 19:55

PRUDENTIAL chief executive Tidjane Thiam's job hung in the balance yesterday as some investors suggested his head should roll for the embarrassing failure of the insurer's $35.5 billion (£24bn) bid for AIG's Asian arm, AIA.

• Tidjane Thiam's ambitious plan to grab AIA failed in negotiation. Picture: Complimentary

Institutional investors reacted angrily to the Pru's revelation that it has been left with a 450 million bill after it walked away from the deal, having failed to renegotiate the price down to $30.38bn.

Paul Mumford, senior fund manager at Cavendish Asset Management, said he felt it was "70 to 80 per cent likely" that Thiam would step down and let someone else take the reins.

Mumford said: "It was a huge foul-up and cost the company a hell of a lot of money. Thiam should have consulted major shareholders first of all. There was a navety there in assuming the deal would be done and dusted, rubber-stamped."

Another shareholder said it was "a disgrace" that it was costing the Pru so much to extricate itself from the deal.

But he said it was in Thiam's favour that first-quarter trading results earlier this year were deemed to be strong.

"It indicated that, organically speaking, the company was being run reasonably well even if Thiam has not been there long enough to establish much of a track record," the shareholder added.

The Pru's withdrawal leaves the insurer with a 152.6m break fee as well as advisory costs and fees connected with the record 14.5bn shareholder cash call it planned to fund the deal.

Some also believe that Harvey McGrath, the Pru's chairman, who backed Thiam on the Asian strategy, is also vulnerable.

McGrath said in a statement: "We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach agreement so we feel it is in the best interests of our shareholders not to pursue this opportunity."