The Prudential has made a bid for the 21% stake in Egg it does not currently own, valuing the online bank at around GBP973 million.
The insurance firm plans to give Egg shareholders 0.2237 new Prudential shares for each Egg share, a premium of 15% to Egg’s closing price on November 28, 2005. Egg’s independent committee will recommend that investors accept it.
The combined strength of our Prudential UK, [fund manager] M&G and Egg businesses provides the group with significantly greater opportunities across the spectrum of personal financial services in the UK than is available to them operating in isolation, said Prudential’s chief executive, Mark Tucker.
But there are likely to be other costs. The Prudential is aiming to save GBP40 million a year through the Egg deal by the end of 2007, at a cost of GBP50 million to be taken a year earlier. Analysts expect Prudential will want to knock nearly 17% off Egg’s current cost base.
Despite this, Egg’s chief executive, Paul Gratton, reckons the deal has potential for revenue growth. There are considerable opportunities to grow Egg’s revenues and profits within the Prudential Group, which will give us access to nearly 2.8 million additional marketable customers, he said.