Prudential slides after judge blocks £12bn deal
INSURANCE group Prudential was rocked by an unprecedented decision by a High Court judge.
The company was attempting to transfer £12bn of pension products to one of its peers, Rothesay Life, in a deal that had already been given the green light by regulators and a number of other parties that need to approve these types of transactions.
When firms shift these types of products, called annuities, between one another, they always have to go through a legal process known as a Part VII that means a judge has to sign it off.
But on Friday a one Mr Justice Snowden blocked the proposed transfer because, he said, customers might have chosen to buy Prudential products due to the 171year-old group’s age, reputation and financial stability.
Rothesay, he argued, does not quite compare in this regard.
The Pru said it was disappointed by the decision, though it has the right to appeal.
It also emphasised the judgement will have no effect on separate plans to split off its UK arm later this year. For the Rothesay deal to complete, the companies need the approval of a judge.
But the situation is complicated by the fact that last year, the pair signed an agreement that has already given Rothesay some responsibility for the annuities.
Investors were clearly perturbed, though, as the firm’s share price slid 1pc, or by 14.5p, to 1415.5p.
The value of the pound ticked higher as opposition to a No Deal Brexit began to gather momentum.
Sterling was up 0.5pc against the dollar at $1.22, while it rose 0.7pc against the euro at around €1.10 – on course for its best day against the single currency in six months, after hefty falls due to jitters over a potential No Deal Brexit. Labour leader Jeremy Corbyn said he is open to using legislation to put a stop to No Deal if his plans to oust the Government through a vote of no confidence fall flat in September. Rightly or wrongly, traders believe leaving the EU with no agreement would damage our economy, and sterling’s increase suggests they are cautiously optimistic it can be stopped.
Although a rise in the value of the pound will be a boon for holidaymakers hoping to eke out better foreign currency deals when they go abroad this summer, a jump in sterling is not normally a good sign for the FTSE 100 index.
This is because most of Britain’s biggest companies sell their goods overseas, so when sterling increases in value, it becomes more expensive to buy their products.
Nevertheless, the Footsie rose (when it eventually opened after a morning glitch) and closed up 0.7pc, or 50.14 points, at 7117.15 points, joining a wider stock rally across Europe. Bourses worldwide have had a turbulent week, with ups and downs triggered by seeming breakthroughs in the USChina trade conflict, only for tensions to reheat and a smorgasbord of data from several countries suggesting that another recession could be on the way. Germany’s Dax index rose 1.3pc, while France’s Cac 40 climbed 1.2pc. Shares in paving supplier Marshalls barely moved on Thursday, when it announced its revenues had risen by a robust 15pc in the first six months of the year partly because of trends to pedestrianise and protect town centres.
But after an initially subdued reaction, investors seemed to notice its healthy figures yesterday, sending shares up 6.2pc, or 38p, to 654.5p. Kazakhstan-focused miner Kaz
Minerals also had a better end to the week following a dire reaction to results on Thursday.
The company’s share price had suffered a 15pc plunge after reporting a 19pc fall in profits.
But it recovered yesterday, closing up 3.7pc, or 15.4p, to 434.5p.