LONDON Prudential PLCs stock has lost about one-fifth of its value since the second-largest U.K. insurer agreed March 12 to buy American General Corp., a deal whose value has dropped by about $4.7 billion as a result.
Even so, investors say a lack of rival bidders means its likely they will approve the $19 billion takeover, which would make Prudential the No. 1 marketer of annuities in the United States.
I would be surprised if shareholders were able to change the course of this transaction because management supports it so much, said Margaret Buescher, a money manager at Vaughan Nelson Scarborough & McConnell, which owns 7.7 million American General shares. The odds of the deal being called off arent zero, but theyre getting smaller every day.
The 153-year-old U.K. insurer agreed to buy American General of Houston as part of a continuing effort to expand outside Britain, where margins are narrowing. By acquiring American General, Prudential would get 65% of its operating profit from the United States, whose economy is slowing.
The deal is good strategically, but its timing isnt perfect, said David Griffiths, a money manager at Scottish Equitable Asset Management, which owns about 1% of Prudentials shares.
The U.K. insurers shares have declined 20% since the deal was announced. The stock closed trading Friday on the London Stock Exchange at $10.29 a share.
Mr. Griffiths, who met Prudential executives last week to talk about the transaction, said he doesnt expect the insurer to include any cash in its offer. The only thing that would prompt Prudential to give cash is a higher offer, but that seems unlikely, he said.
Prudential would pay 3.66 ordinary shares, or 1.83 American depositary receipts, for each American General share. That would value American General at $37.63 a share. Its stock was trading at $35.84 a share at midday Friday.
We have a merger agreement, and no discussions are taking place regarding changing the terms of the deal, said Steve Colton, a Prudential spokesman.
Prudentials stock, among the worst-performing insurance stocks in Europe this year, has lost 32% of its value since Jan. 1. The Bloomberg 500 Europe Insurance Index has declined 24% in the same period.