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Thursday, March 11, 1999 Published at 10:02 GMT

Business: The Company File

Pru pounces on investment rival

Prudential moves further into the trust-based investment market

Leading life insurer Prudential has made a 1.9bn bid for investment group M&G.

M&G, the UK's second-biggest provider of unit trust investments and personal equity plans (Peps) to private retail investors, is supporting the bid.

The move signals a further strategic shift by Prudential as it diversifies away from its insurance-based business to offer investors trust-based investment products. The deal is expected to make Pru the biggest provider of unit trusts to UK investors.

Few job losses

Prudential's finance director Jonathan Bloomer said there were few job losses expected from either M&G's 1,100 workers or Prudential's 20,000 employees.

[ image: An extra 18.5bn to manage]
An extra 18.5bn to manage
Sir Peter Davis, chief executive of Prudential said: "The combination of Prudential and M&G creates leading market positions in the UK retail insurance and investment product sectors.

The takeover will see extra 18.5bn in funds under management and 725,000 investors come under Prudential's wing. The move will allow Pru to garner a larger share of the growing savings and pensions business, soon to be boosted in the UK by the advent of stakeholder pensions and individual savings account (Isas).

Share surge

Pru's offer amounts to 25 per M&G share, a 40% premium to its closing share price on Wednesday. M&G shares surged 39% towards the offer price after the news.

Michael McLintock, chief executive of M&G, said: "The offer represents good value for M&G shareholders, whilst allowing M&G to retain its identity within the enlarged group.

"I am confident that Prudential is the right partner to provide the resources and distribution necessary to maximise M&G's potential."

Major shareholder Esmee Fairbairn Charitable Trust has accepted the offer leaving the approval of other shareholders including CU Investment Management, the investment arm of insurance group CGU and Royal & Sun Alliance, to be sought.

Funds to stand alone

Prudential says when M&G is absorbed it will remain a stand alone fund manager alongside its existing fund management business PPM but that its smaller pensions and insurance lines will be integrated with Pru's.

Cost savings from the tie-up are forecast to amount to 10m a year.

The deal represents a further step in the rapid expansion of the Prudential which has recently launched its "Egg" banking service and which bought the Scottish Amicable insurance company two years ago.

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