Prudential Plc’s largest stakeholder, Capital Group Cos, rarely makes a concerted push to influence corporate management. When it does, the world’s biggest equity mutual-fund manager can be a force.
One of Capital Group’s managers, Gordon Crawford, campaigned for the departure of AOL Time Warner Chairman Stephen Case in 2003, and criticised former Yahoo! Inc Chief Executive Officer Jerry Yang for rejecting a takeover bid from Microsoft Corp in 2008. Case resigned in May 2003; Yang stepped down in January 2009.
Now the firm is taking a close look at Prudential, the UK’s biggest insurer, which is seeking shareholder support to buy American International Group Inc’s main Asian unit for $35.5 billion. A Capital Group analyst met with Prudential and at least one other company, according to a person with knowledge of the meeting who declined to be identified because the discussions are private.
“Capital Group, in situations where they have a substantial holding, wouldn’t be reluctant to make their views known,” Burton Greenwald, an independent fund consultant based in Philadelphia, said in a telephone interview. “They just do it with a velvet glove rather than an iron fist.”
Prudential CEO Tidjane Thiam needs 75 per cent of shareholders to support a $20 billion rights offer to fund the purchase of AIA Group. and will publish a prospectus on May 5, ahead of a shareholder vote on May 27.
Breakup estimate
Prudential may be better off selling its British, US and Asian fund-management units, according to Barrie Cornes, an analyst at Panmure Gordon & Co in London. He estimated the asset sales could raise about 24.2 billion pounds ($37.1 billion), about 65 per cent more than Prudential’s market value.
Maura Griffin, a spokeswoman for Los Angeles-based Capital Group, declined to comment for this article.
Capital Group’s Capital Research & Management Co raised its Prudential stake to 12 per cent as of April 8, according to a regulatory filing. BlackRock Inc. owned 6.3 per cent at year-end, making it the second-biggest holder, according to Bloomberg data.
While Capital Group is traditionally publicity-shy, it made headlines when media-industry analyst and money manager Crawford led the campaign against Case.
Crawford acted after AOL Time Warner’s stock fell 72 per cent in the year ended June 30, 2002.
He asked for Case’s resignation in August 2002, and gathered support from Liberty Media LLC Chairman John Malone and Ted Turner, the founder of Cable News Network.
Crawford again spoke publicly in May 2008 about Yahoo!’s rejection of a $47.5 billion takeover bid from Microsoft, saying he was “extremely disappointed” in Yang and other board members.
‘Substantial clout’
“They’re not activist shareholders,” Geoff Bobroff, president of Bobroff Consulting Inc in East Greenwich, Rhode Island, said in a phone interview.
“But because of their ownership, domestically and internationally, they have substantial clout.”
In 1998, Capital Group pushed CoreStates Financial Corp, a regional bank based in Philadelphia, to give up its independence and eventually accept a takeover bid.
CoreStates had rejected an offer from Mellon Bank Corp in 1997, when the fund company wrote to the bank’s board, chastising directors for spurning the bid and questioning CoreStates’ ability to succeed as a standalone company, the Wall Street Journal reported that October. CoreStates agreed to a $17 billion takeover in 1998 from First Union Corp in Charlotte, North Carolina, the largest US bank acquisition at the time.
