WHAT THE MEDIA SAY: Pru pounds 31bn US bid surprises City analysts

Organisation: Prudential



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'

(www.independent.co.uk, 17/3).



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

benefits.



Analysis and commentary by Echo Research. More information can be found

at: www.echoResearch.com.



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