UK insurer Prudential sets pricing in US$2.4 billion Hong Kong stock placement

no higher than HK$172, statement, raise as much as US$2.9 billion, completed the spin-off, better focus, prospectus, Goldman Sachs, HSBC

Prudential, the biggest UK insurer by market value, said it expects to raise HK$18.5 billion (US$2.4 billion) from a share placement in Hong Kong to repay older debt and fund its global expansion.

The London-based company plans to sell up to 130.8 million shares at HK$143.80 each, representing a 2.6 per cent discount to its closing price of HK$147.70 in Hong Kong on Friday. The firm last week indicated selling the stake at no higher than HK$172 each.

“Prudential is a growth business exclusively focused on the unmet health, financial protection and savings needs of people in Asia and Africa,” chief executive Mike Wells said in a statement. “Our share offer allows investors to join us on our journey as we execute our strategy, which we believe will result in long-term delivery of future shareholder returns.”

Prudential, which targeted to raise as much as US$2.9 billion in the offering, has a market value of about US$49.8 billion, topping home rivals like Legal & General, Aviva and Phoenix Group, according to Bloomberg data.

Most of the proceeds – US$2.25 billion – are expected to be used to redeem existing high coupon debt within six months, the company said. Its nearest maturity bond is a £300 million (US$410 million) 6.875 per cent note due in January 2023. The remainder will be used to “further increase Prudential’s financial flexibility.”

Some 6.5 million of the placement shares are being offered to retail investors in Hong Kong, though that tranche could be increased depending on demand. The stock has risen 3.1 per cent in the city this year, compared with a 9 per cent decline in Asia rival AIA Group.

Prudential said it would make a further announcement regarding the level of indications of interest in the placing, as well as the level of applications in the retail offering on Thursday. The new shares are expected to begin trading on October 4.

The share placement by Prudential is one of the biggest follow-on offerings in Hong Kong this year and comes as a crackdown on the tech sector in China has cast a pall on listings recently.

It comes just days after Prudential completed the spin-off of Jackson Financial, its US retirement services arm. Prudential retained a 19.7 per cent interest in Jackson following the demerger.

Prudential said at the time that the spin-off of Jackson into a separate, publicly listed company on the New York Stock Exchange would allow it to better focus on its businesses providing life and health insurance and asset management services in Asia and Africa.

The company reported a profit from continuing operations of US$1.06 billion in the first half of this year, according to its prospectus. Its revenue net of reinsurance was US$11.7 billion during that period.

Prudential, via a 50 per cent owned-joint venture with Citic, has 20 branches covering 99 cities in mainland China. Its China business reported a profit of US$394 million in 2020, a 47 per cent increase over the prior year, according to its prospectus.

Citigroup, Goldman Sachs, Citic Securities and HSBC are acting as joint global coordinators and bookrunners on the offering. Rothschild is acting as its financial adviser.

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