Yesterday the value of the Pru's offer rose by 7 per cent not because the City wants it to win but

Posted by admin · · Jump to comments

Yesterday the value of the Pru's offer rose by 7 per cent, not because the City wants it to win but because it hopes that AIG has got Mr Bloomer off the hook.The Pru remained non-committal yesterday merely observing that its merger agreement with American General remained in force. However, the message emanating from the Pru camp was that it was not in the mood to engage in a bidding war. Even after yesterday's share price rise, its offer is still worth $1bn less than AIG's. If the Pru were to re-bid, then its share price would almost certainly bomb again forcing it to throw yet more paper at American General shareholders. It is the same no-win game that Bank of Scotland found itself in when it lost the battle for NatWest to Royal Bank of Scotland.Moreover, the Pru would immediately have to add £400m to the value of any higher offer it made because AIG has already calculated it can absorb the cost of the poison pill and still make its bid work.A merger with the Pru could prove the safer bet for American General shareholders because, unlike AIG, it is much less exposed to the risky end of the insurance business, such as property and casualty.But AIG has two important natural advantages. First, the cost savings it could achieve by jamming the two businesses together are almost certainly greater than anything the Pru could achieve Second, it is paying with US paper.

American General shareholders would not have to worry about owning a company that was listed and largely held in London.If the Pru emerges with its £400m break-up fee and perhaps a few of the businesses AIG has to sell to gain regulatory clearance, then Mr Bloomer could argue he had beaten an honourable retreat.It would, of course, bring a temporary halt to his dreams of empire building and global domination. But it would be a neat way of avoiding a back-me-or-sack-me confrontation with his shareholders.Messier businessThe battle of the bruised egos moved into a new arena yesterday after Vivendi's Jean-Marie Messier decided he would see Klaus Esser in court. This particular Franco-German spat has its origins in the record-breaking takeover battle between Chris Gent's Vodafone and Mr Esser's Mannesmann just over a year ago. To recap, Mr Esser succumbed to Mr Gent's £109bn bid after his last line of defence a merger with Vivendi was blown out of the water by Mr Messier's decision to link up instead with.. you guessed it...

Vodafone.As a consolation prize, Mr Esser picked up a £19m severance cheque from Mannesmann, a payment which managed to put even the £10m success fee collected by Mr Gent into the shade. Unfortunately, it has also attracted the attention of the Dusselfdorf prosecutor's office which is now investigating Mr Esser's motives for accepting Vodafone's offer.Quite why Vivendi decided to switch horses so late in the day is now the subject of a libel action brought by Mr Messier against Mr Esser. In a recent book, Mr Messier blamed Mr Esser for the failure of their merger, claiming that he baulked at the last minute over boardroom representation in the combined group.Mr Esser retaliated by accusing Mr Messier of being "indecent and dishonourable" by negotiating with Vodafone at the same time and Mr Messier responded by suing.At this point, readers might be wondering whether the two litigants have nothing else to do with their time. Mr Esser not only walked away with a king's ransom but he also walked into another well-paid job as a partner in the New York private equity house General Atlantic.