Issue: bid for American General
With its pounds 31bn bid for financial services group American General,
the Prudential embarked not only on an extremely ambitious US expansion
strategy, but also on a mammoth public relations exercise. Its
communications task was made bigger, according to critics, by its
handling of the announcement.
Untrailed and unexpected, the Pru's bid to enter the insurance super
league caught the City unawares.
The element of surprise, a bid price deemed too high, and deepening
pessimism about US economic prospects combined to spark a stock plunge
that wiped 14 per cent off the Pru's share value in just one day.
The next day's headlines were distinctly chilly, typified by The
Guardian's 'Deal from the Pru alarms City' (13/3).
'The timing looks poor, the deal looks expensive and America is a
graveyard for many top British companies,' summed up The Sun (13/3).
'This is one of the few financial deals in recent history that didn't
leak. But the Pru paid dearly for such obsessive secrecy,' was the
verdict of The Daily Telegraph (18/3).
Despite the collective City and media raspberry, Prudential CEO Jonathan
Bloomer vigorously communicated the deal's benefits, defending it as a
good strategic move, and stating that once investors had got over their
surprise, 'they too will have something to celebrate'
Sure enough, City sentiment became substantially more positive as
analysts largely approved of the deal, acknowledging that it would give
the Pru 'real global spread and (make) it a real big hitter in the US'
(www.ananova.com, 15/3). This came amid a general recognition that the
share rout had been overdone.
Sunday newspapers remained sceptical of the deal. Commenting that the
takeover had 'little strategic or financial logic', Sunday Business
columnist Hugo Dixon urged shareholders to vote down the deal, while
other commentators marvelled at the scale of the PR exercise required to
win over shareholders and 'undo the damage inflicted by that first
negative reaction' (The Sunday Times, 18/3).
As far as the City and media are concerned, it seems that the illegal
but widely used PR tactic of leaking announcements has definite
Analysis and commentary by Echo Research. More information can be found