Prudential's AIA deal hits shareholder glitch

Prudential faced the makings of a shareholder revolt over its $35.5bon deal to buy AIA on Tuesday, raising the prospect the deal could fail and adding to pressure for a breakup of the British insurer instead.

"There is a very good chance they won't get the 75 per cent needed - in which case the management would be in a very difficult position; effectively a vote of no-confidence in the strategy of the company," one top-10 shareholder told Reuters.

Newspapers also reported that Capital Research and Management, Pru's largest shareholder, has reservations about the deal to buy AIG's Asian unit, and could prefer a break-up of Prudential.

Shares in Prudential, which had rallied nearly 2 per cent in early trade before paring nearly all those gains, were higher again by 0902 GMT, up 1.28 per cent at 553 pence.

"We have had constructive meetings with shareholders... our investors will be reading the prospectus with interest," a spokesman for Prudential said, when asked about the latest comments from investors.

The investor who spoke to Reuters said the break-up idea had merit.

"To hear that Capital is not supportive of the deal will stir this up a lot more (among shareholders)," the top-10 investor added.

"There is merit in the argument that more value might be realised if Pru was broken up. We have encouraged Pru to sell the UK business and focus on the Asian business - it's an argument certainly worth exploring."

He added that he had warned the Pru board not to "wriggle out" of the 75 per cent support level currently needed to push through the AIA deal.