Prudential UK eyes P&O takeover.

Saturday 31 July 2010. By The StarBizWeek.

Details of M&A still remain unclear. Petaling Java: Prudential UK is believed to have submitted an application to Bank Negara to commence talks on the potencial acquisition of local general insurance company. Pacific & Orient Bhd (P&O).

However, the details of the potential merger and acquisition (M&A) exercise between the two parties were still unclear.

This has added fuel to recent market talk that P&O had emerged on the radar of potential buyers.

According to Kenanga Research, the owner was contemplating a divestment in P&O in a deal that could reap proceeds that were well above P&O’s implied stock market valuations.

Chan Thye Seng, the managing director and chief executive officer of P&O, holds a 51.4% stake in the company.

When contacted, P&O declined to comment on the matter.

When contacted, a spokesperson from Prudential Malaysia said it did not comment on a market speculation.

“Having undergone a massive change in business direction over the last two years, P&O has engineered a major turnaround in profitability,” said Kenanga in a recent report.

P&O returned to the black in the previous financial year ended Sept 30, 2009, with a net profit of RM14.9mil compared with a net loss of RM32.6mil the year before.

But, for the first six months of the current financial year, P&O slipped back into the red with a net loss of RM1.4mil compared with a net loss of RM6.1mil in the previous corresponding period.

As at March 30, 2010, its net asset per share was RM1.34.

P&O’s main focus is on two core areas – financial services and information technology (IT).

“Consistent with this strategy, the group has branched out to build and develop businesses that support and contribute to the growth of these core areas, especially IT.

“In terms of its 30 years in general insurance, its businesses have achieved good organic growth as the company cultivates deep relationships with customers, agents and motorcycle shop owners.

“P&O Insurance has made significant progress in the last two years by restructuring its business focus,” the research house said.

Going forward, Kenanga expects P&O to record a premium growth of 20% and 15% in the current and next financial years.

Bank Negara liberalized the insurance sector in April last year in its effort to strengthen the resilience and competitiveness of the insurance and takaful industries.

Foreign equity participation in insurance companies and takaful operators has increased up to 70%.

However, a higher foreign equity limit would be considered on a case-by-case basis for players who can facilitate the consolidation and rationalization of the insurance industry.

To date, post-libéralisation, two listed companies with general insurance business, namely Jermeh Asis Bhd and Pacific’s Bhd, had been given the nod by Bank Negara to commence negotiations on the potential disposal of their respective insurance units.

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