UK insurer Prudential has offered to buy out minority shareholders in online bank Egg at 118 pence a share, five years after floating it at 160p and a year after failing to sell it.
Britain's second-largest listed life insurer, which already owns 78% of Egg, said today that its share offer for the remaining shares valued the unit at about £973m sterling and represented a 15% premium to Egg's closing price yesterday.
Prudential first mooted the idea of bringing the bank under its full control in October, saying it expected revenue gains and cost savings from a closer working relationship between Egg, Prudential's UK life operations and its M&G fund arm.
'We believe the acquisition of the minority stake is an important step in progressing our UK strategy. The transaction is a win for shareholders of both companies. It provides Egg minority shareholders with an attractive premium,' Prudential CEO Mark Tucker said.
Tucker's predecessor, Jonathan Bloomer, angered investors when he failed to find a buyer for the Internet bank last year. Bloomer stopped and started negotiations with a number of potential buyers, including Royal Bank of Scotland and US bank JPMorgan Chase & Co. He was ousted earlier this year.
Tucker, who replaced Bloomer in May, said the deal would generate substantial pre-tax cost savings, with £40m sterling expected by the end of 2007. The company will spend around £50m achieving the cost reduction.
He said that buying out minority shareholders meant it could achieve the savings and unspecified revenue gains quicker and more efficiently. Tucker plans to sell Prudential savings and healthcare products to Egg's customer base, including a Prudential branded mortgage, and sell Egg loans and credit cards to Prudential's customers. He said the deal would increase Prudential's earnings next year.
