You can say that there is a history of good growth. Crunched together, the two insurers would have leading positions in key Asian markets. Value new Prudential business in the region has increased by almost 30 per cent a year over the last decade, six times the rate of growth in other places.
Prudential is buying American international assurance, A.I.G., unit after two years of hard times for his rival in Asia attributable in part to the associations with the A.I.A. turbulent father. United States Government, majority shareholder of A.I.G., is interested in a quick exit. Simply remove A.I.G. A.I.A. could restore the trust of customers - and growth. 1.7 Times had embedded value, a secure common valuation metric A.I.A. seems relatively cheap.
However, some perspective is useful. Purchase A.I.A. imply heroic contortions. The financing agreement will need to raise $ 20 million equivalent to the market value of preannouncement Prudential, through the use of a rights issue. Also give shares and other instruments for which will be released with an 11 per cent stake in Prudential A.I.G..
Duplicate database sales agents could prove problematic too. Prudential and A.I.A. have been rivals in Asia and routinely spent lavishly to personal Cook. Many agents A.I.A. expected shares in an initial offering of shares now moot. Rivals will be be licking their chops at the prospect of nabbing A.I.A. agents and customers.
Shareholders seem to buy the growth story by now. But still it is not clear that the agreement will offer returns to justify the thrill of Prudential. Based on operating earnings for 2009, A.I.A. would have created a mere 5 percent return, even the cost deducted $ 340 million Prudential says that he thinks you can squeeze out three years. It is much lower than the cost of capital A.I.A.. Double synergies and earnings increase of 50 per cent and the return is still below 8 percent. Prudential might be safe but skepticism seems prudent.
Trusted advisor?
Wall Street gets most of guff for potential conflicts of interest. But the bankers should not feel too lonely when advisers legal white-shoed as Cravath Swaine & Moore work together with them in agreements.
Cravath is arguing in a Delaware Court that its work for a company, Airgas, there should be no prevents work it on the other hand, Air Products, a hostile $ 5.1 million bid for - you adivinado: his former client, Airgas.
Airgas argues that Cravath work provides access to privileged information, which now offers Air products an unfair advantage. If Airgas gets its way in the courts, lawyers Cravath banned represent the products of Air and could be responsible for damages.
In strict legal terms Airgas faces a high barrier. Addition, the case is heard by a judge dismissed charges of similar conflict last year against Wachtell, Lipton, Rosen & Katz, the firm now to the other side of the argument as an advisor to Airgas.
Cravath says that you wasn't that cozy with Airgas. But even if you lose the Airgas by publicly called into question the ethics of Chief Advisor his rival, Airgas could buy yes some time in the acquisition attempt. Cravath has placed in the uncomfortable position of arguing it had only "routine" advised Airgas, not what one would expect for 2 million dollars in legal fees.
While the Cravath may not have violated the law, you will need to reassure other clients for their loyalty. Not enough simply to keep in mind that Airgas hired Goldman Sachs, an adviser had long with Air products. All in all, the executives expect this kind of behavior from their bankers.
When times are difficult, even as Cravath law firms might be more willing to sully his white shoes. Jilting casual for a commercial sense more generous sugar daddy dating partner. But with these conflicts outside in the open clients, companies wishing to reach agreements with their law firms in advance about how much loyalty to wait.
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