Prudential share price: Shore Capital upbeat on group’s M&G merger

Move fuels break-up speculation

Prudential share price: Shore Capital upbeat on group’s M&G merger

Prudential’s (LON:PRU) plan to merge its two big UK businesses into a single entity makes a lot of sense, analysts at Shore Capital have said. The move, however, has also fuelled speculation that it might lead to the break-up of the company.

Prudential’s share price lost ground in the previous session, shedding 0.84 percent to close at 1,826.00p. The stock, however, outperformed the broader London market, as the FTSE 100 tumbled 1.44 percent to 7,389.94 points, on the back of a selloff in housebuilders and the ongoing tension between the US and North Korea.

ShoreCap reiterated its ‘buy’ rating on the Pru yesterday, noting that the merger of its UK life insurance division with its M&G fund management business ‘makes enormous sense’. The FTSE 100 group announced the move alongside its interim results, noting that it would combine the businesses into one savings and investments provider, which will manage £332 billion of assets.

Citywire quoted the broker’s analyst Eamonn Flanagan as saying that the merger would help the blue-chip insurer “to drive out costs and to deliver a unified proposition to the market”.

“In so doing, Pru now has three fully formed, unified, distinct and financially robust divisions across Asia, the US and the UK,” the analyst pointed out. “The strength of the group’s business model across the world is unparalleled, to us, and it has a formidable balance sheet to match.”

The move meanwhile has fuelled speculation that the business is being prepared for a sale or a spin-off. Edward Houghton, an analyst at Bernstein, told The Times that the move “lends further credence to the idea that Prudential will look to dispose of its UK annuity book”.

“It will also intensify speculation around a broader break-up of the group,” he added. 

As of 07:58 BST, Friday, 11 August, Prudential plc share price is 1,365.25p.

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