Amid the heckling and rabble-rousing at Monday’s Prudential shareholder meeting, the most important voice was the softest: that of a contrite-sounding Tidjane Thiam.
The chief executive’s corporate career – at least in the UK – hinges on how he emerges from the life assurer’s failure to buy AIA, the Asian arm of AIG of the US. “Failure” is the correct word. Harvey McGrath, Prudential’s chairman, spent much of Monday’s meeting explaining how much due diligence the board put in, how closely (after a terrible start) investors were consulted, and how hard the company fought to seal the deal at a lower price, only to be turned down by AIG’s board. But it was Mr Thiam’s vision that drove the original offer, at the higher price, and that bid blew up.
The chief executive expressed his regrets. He also said, rightly, there should be no shame in trying. Jack Welch would call the AIA offer a “swing for the fences” – the sort of big opportunity a true leader doesn’t pass up. But Mr Welch had established a sound five-year record at the helm of General Electric before he proposed the transformational acquisition of RCA in 1985, which brought GE the NBC television network. It’s easy to forget that yesterday was Mr Thiam’s first annual meeting as Pru chief executive.
In his brief, occasionally almost inaudible, address to shareholders, Mr Thiam set himself two tasks: to take advantage of opportunities ahead and to start restoring confidence. The Pru’s trading update on Monday offered plenty of reasons why investors have faith the group’s underlying business should continue to do well. A few years of similar growth in Asia (sales up 33 per cent in the five months to end-May, compared with the equivalent period of 2009) and the memory of the mishandling of the AIA process may fade. But it is, and will remain, Mr Thiam’s signature deal. That makes it hard for the management and board of the Pru to return to the way they were. The most damaging effect of the AIA misadventure is that it suggests Mr Thiam, for all his talents, may have neither the temperament nor the patience to take the Pru down the route of organic growth. Investors may give him a half-chance to disprove that suggestion, but the board should start preparing a shortlist of successors now.
Tell Emma to take care
It’s too soon to book a delivery time, let alone price-match the product against other retailers’ offerings, but Ocado is tempting its most loyal customers with another potentially desirable line of produce: its own shares. Mid-July is the possible target date for an Ocado listing. You would no more leave a flotation out for six weeks in these markets than you would put a pot of Waitrose yoghurt out on the window-ledge for a month and a half in midsummer. Even so, more than 500,000 customers are being alerted to the possible “opportunity” to buy shares.
Now I have plenty of time for the Ocado service, but the softening up of potential investors is worryingly reminiscent of US dotcoms’ efforts to pre-market flotations in the late 1990s. The impression a privileged few could purchase shares at the offer price, while others could not buy until later, when the stock had surged higher, helped fuel the dotcom frenzy.
Ocado prefers the parallel with the big UK privatisations of the 1980s: “Tell Emma” rather than “Tell Sid”. But even those offers were prone to stagging – the purchase of shares for immediate resale at a profit. Broadband internet access has made the prospect of retail investing as easy and cheap (for the issuer as well as the investor) as web shopping itself. But hands off the mouse for now. Ocado shares will be a different proposition from the goat’s cheese and grands crus customers are used to buying. Until a price is set and a prospectus published, it will be hard to judge whether the stock is a fine wine, which will appreciate in value, or the ultimate perishable.
Too easily forgotten
The prospect of former HBOS bankers being allowed to live and fight another day if Lloyds sells a majority stake in their integrated finance business to Coller Capital evokes mixed feelings.
On the one hand, once-bitten, twice-shy investment managers are hardly likely to make the same mistakes again – and there’s a case for saying they should be made to sort out the mess themselves (though they’ll be paid for the chore).
On the other, one of the problems in the financial sector is that memories are so short. A reprieve for those who bought at the top of the market only to incur vast losses in the downturn will only prolong their selective amnesia.