Collapse of Prudential deal helps sterling
Last night's spectacular collapse of the deal between Prudential and AIG has led to a rise in sterling across currency markets. This is purely and simply an unwinding of the potentially enormous position which Prudential would have had to take to pay for the US$35.5 billion acquisition. While this is obviously a welcome move for the UK currency, which has been under pressure for some time, it is likely to be short-lived.
As we mentioned yesterday evening, the Prudential deal is all but dead and unlikely to be resurrected which is placing more and more pressure upon the Prudential management and Prudential as a whole. In these turbulent markets cash rich companies are on the prowl for potential takeover targets and while only a few weeks ago Prudential would not have been amongst one of the favourites, the situation has changed over the last few hours.
The Prudential share price is down today, even though the proposed rights issue is likely to be pulled and the company is unlikely to be investing anywhere near the US$35 billion cost of the deal in the short to medium term. Quite where the Prudential share price goes from here is anybody's guess!
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