Prudential will spend £350m on M&G split

PRUDENTIAL is set to shell out £350m on spinning off its M&G arm into a separate business.

The 171-year-old company will pay £75m to its advisers, including investment banks Goldman Sachs and Rothschild, £141m to debt holders and £135m in other costs as it hives off M&G.

But investors will reap a £1.3bn windfall in total, as the businesses hand out dividends to keep shareholders on-side following the demerger.

The separated M&G business, whose shares begin trading on October 21 when the split takes place, will pay a £310m dividend next May, plus an extra £100m dividend related to the deal.

Prudential, which will remain listed on the London Stock Exchange, will pay out £185m next May, which M&G gave it prior to the demerger, as well as the remaining £750m.

Prudential was founded in 1848, to provide loans and life assurance products. By the 1990s, it was covering a third of the UK population, and is still Britain’s largest insurer.

But now the ‘Man from the Pru’ is to focus on Asia, as the Prudential business leaves behind its more Europe-concentrated M&G arm. John Foley, M&G’s chief executive, said his asset management and insurance business would also look to grow in Asia and the US, but added: ‘We are going to scale up operations at pace in Europe.’

M&G looks after more than £340bn of investors’ money, and serves around 5.5m investors as well as 800 institutions. It is not yet clear what it will be worth when it lists as a separate entity.

Prudential shareholders will receive one M&G share for each Pru share, and – following the October split – they will be able to buy or sell more as they see fit.

Analysts at Shore Capital said the Pru break-up was ‘what the market has wanted for years’.