According to Bank of America (NYSE:BAC) analyst Blair Stewart, the attempt by Prudential Plc to acquire an Asian unit of American International Group is not a guarantee at this time, as it’s possible shareholder approval may be withheld in the $20 billion rights offer for AIA Group Ltd.
In a note to clients, Stewart stated that “Shareholder approval of the deal should not be seen as a given. The prospects of gaining 75 percent approval are finely balanced.”
Part of the problem seems to be the overall price tag of $35.5 billion to acquire the company, which may be far too high of a premium for shareholders to allow the deal to go forward.
Immediately after the price of the deal was announced, the stock got a 20 percent downward hit, making it uncertain as to whether shareholder will signal the go ahead, with the market not liking the costs of the deal.
Analysts believe if the stock continues to get downward pressure, it could be a deal-killer, as the deal isn’t scheduled to close till May, and that gives a lot of time for movement of the stock in anticipation of the event.
If it continues to be a negative perception, it’ll be harder for the deal to become a reality if the stock continues to be punished as a consequence of investors and shareholders not believing it’s a good deal.
Prudential said it is increasing the speed of its plans to be listed on the Hong Kong exchange before the rights offer, and added no new shares in the company are expected to be issued as part of that process.
If the deal doesn’t go through, the stock price of Prudential is expected to rebound to levels before the deal was announced.
