British insurance group Prudential unveiled on Thursday a friendly bid to purchase the minority 21,7% stake of online banking arm Egg which it does not already own.
“The boards of Prudential and Egg are pleased to announce the terms of a recommended offer,” the two groups said in a joint statement.
The offer valued Egg at £973-million ($1,684-billion) and represented a premium of 15% to the bank’s closing share price on Wednesday, one day prior to the announcement.
The insurer added that buying the minority Egg stake would help it achieve £40-million worth of annual cost savings by the end of 2007.
Prudential shares slipped 1,23% to 521 pence in morning London trade, while the capital’s FTSE 100 index of leading shares gained 0,50% to 5 450,20 points.
However, Egg’s share price surged 13,4% to 116,25 pence. The internet bank is listed on the second tier of the British stock market.
Prudential chief executive Mark Tucker said the acquisition would lead to “substantial cost savings”, adding that “this is an attractive financial transaction for both Prudential and Egg shareholders alike”.
Under the offer, Egg investors will receive 0,2237 shares in the enlarged Prudential group for every share that they own.
Prudential said that the offer was equivalent to 118 pence per share.
In October, the group committed itself to the long-term future of Egg, but said that no decision had been made over increasing its stake.
Egg boasts over three million young affluent consumers, a strong brand and the potential to cross-sell savings and loans products, Tucker had said in the October trading update.
Tucker’s predecessor, Jonathan Bloomer, had put the Egg stake up for sale in January 2004, but withdrew it from the market eight months later after failing to attract a high enough price.
Tucker, who became chief executive in May, has said Prudential will focus on growth in Britain, the United States and Asia — where its operations are forecast to turn cash positive from 2006.
Egg sold its French savings and online broking business to Dutch financial services group ING last year, marking its withdrawal from France after less than two years. – AFP