Prudential chiefs to face shareholder fury after refusing to quit over AIA deal

Shareholders in Prudential have criticised the insurer's chairman and chief executive for showing "high-handed arrogance" in their refusal to step down after the collapse of the planned takeover of the Asian life insurance division of AIG. The embattled top management of Prudential today came out fighting against those who believe they should lose their jobs over the failed $35.5bn (£24bn) acquisition of AIA , in an apparent attempt to set the agenda for what is likely to be a fractious annual meeting on Monday. In a bullish interview with the Financial Times , Prudential's chairman, Harvey McGrath, insisted that neither he nor his chief executive, Tidjane Thiam, would have to quit over the debacle, which has cost the insurer at least £450m – equivalent to its dividend payments last year. "The board is completely behind the management team. No one has offered to resign and no one has been asked to resign," McGrath insisted. But investors reacted angrily to the comments. Robin Geffen, chief investment officer of Neptune Investment Management, who led a shareholder rebellion against the deal, said today: "Nobody was surprised to see the high-handed arrogance of the board's views, as expressed in the FT." He said that Prudential's largest shareholders were pushing for one-to-one meetings with the management and ultimately "somebody is going to be held accountable" for the AIA fiasco. Prudential pulled out of the deal on Wednesday after failing to negotiate a lower price of $30.4bn. The takeover, which would have been the biggest in the world this year, fell apart after major investors, including BlackRock and Fidelity, said that the price was too high. Several big shareholders welcomed the collapse of the deal, unconvinced that the takeover would have been a success, aside from the price tag. Later on today, Thiam made his first public apology. "I'm very sorry we had to spend the money and didn't get a deal," he said in a Bloomberg television interview. "That's a pity. It's a lot of money." But he said that he still had no regrets about attempting to make the record acquisition, describing it as a "unique opportunity". AIG's rejection of the lower offer had been "an unexpected outcome and a big surprise", he added. Thiam also maintained that he did not feel under pressure from shareholders to resign. "They have not expressed that desire," he said. Some investors have suggested that he was about to be replaced by Michael McLintock, head of Prudential's M&G Investments. "It is a clever thing to try and connect my inability to seal a $35bn deal with my broad ability to run a company, but it is a fallacy," Thiam told the FT. "To say I'm inexperienced in running a $35bn transaction, that's true. Not many have experience of running a $35bn transaction." Paul Mumford, senior fund manager at Cavendish Asset Management, said: "I was slightly mystified by his comment. He shouldn't even have contemplated doing the deal if he felt like that, let alone stick to a value that was far too high." McGrath claimed that the shareholders who were calling for heads to roll were "outliers". But many institutional investors would like to see change at the top. Prudential will face its shareholders on Monday at an eagerly awaited meeting. Originally, investors would have been asked to approve a record-breaking £14.5bn rights issue to fund the AIA deal. Now, though, the meeting will allow them to vent their feelings over the deal's collapse, and some are expected to demand a boardroom shakeup. However, some analysts were sanguine. "Asia can continue to grow, so what's changed?" Kevin Ryan of ING Financial Markets asked. "Pru goes back to the day job and, given the dislocation of the last couple of months, not before time." Meanwhile, the Italian insurance group Generali has dampened speculation that it could make a bid for AIG's Asian arm.