Manager Research

Prudential Investment Managers recently announced that M&G Investments has acquired a controlling stake in the company, increasing its holding from 49.99% to 50.12%. As a result, Prudential will again become a subsidiary of M&G.

M&G Investments

Municipal & General (M&G) Investments is a global asset manager based in London and was founded in 1931. The company manages investments across a range of different mandates and currently has asset management hubs across the world. In 1999, M&G Investments, which at the time was the UK’s largest unit trust group, was acquired by London-based Prudential plc, a UK life insurance company. In 2017, Prudential plc merged M&G Investments with its UK and European investment businesses to form a new division called M&G Prudential. In 2019, M&G demerged from Prudential plc to help align the businesses with their respective client bases. Following this, M&G listed separately on the London Stock Exchange and still offers asset management services and insurance-wrapped savings products.

Prudential Investment Managers

Prudential Investment Managers was founded in Cape Town in the 90s as part of Prudential plc and was owned indirectly through M&G Investments (at the time a subsidiary of M&G). When Prudential plc demerged from M&G in 2019, M&G retained its stake in Prudential Investment Managers. Over time, through a series of corporate actions, Prudential Investment Managers went from being a subsidiary of M&G to an associate in 2012, with M&G’s shareholding in the company dropping to 49.99%. Prudential in SA has always operated quite independently from the UK businesses, while drawing on investment expertise within M&G.

Rationale for the acquisition

The acquisition of an additional 0.13% of Prudential Investment Managers means that Prudential Investment Managers has again become a subsidiary of M&G. The acquisition was largely driven by M&G’s ambition to establish a global asset management business with investment centers across the UK, Europe, the US and Asia, and it does not come as a surprise to us as M&G has long sought to establish one of these hubs in Africa.

Changes going forward

In addition to M&G increasing its stake in Prudential Investment Managers by 0.13%, the Prudential Staff Investment (PSI) Company will increase its shareholding in Prudential from 28.01% to 28.08%. Prudential’s black empowerment partner, Thesele Group will marginally decrease its shareholding in the company from 22% to 21.8%. The decrease in the Thesele Group shareholding does not mean that Prudential will lose its Level 2 BBBEE rating and in fact on a look-through basis Prudential expects its BBBEE rating to increase to Level 1 during 2021, because of increased black staff ownership in the PSI Company. Going forward, we also expect Prudential to make some changes to its branding to align the company with M&G, although this is not yet confirmed.

Currently, we do not believe that the acquisition by M&G will have a notable impact on Prudential’s investment processes and businesses. However, we are also not overly positive on the changes as Prudential now forms part of a global asset management business and needs to fit into M&G’s corporate strategy, forfeiting its relative independence in the process.  We are likely to see a number of changes at the business level where efficiencies may be gained, however our focus will be on any potential impacts on the well established investment capability, particularly as it relates to offshore assets.

We have not changed any ratings on the Prudential funds that we cover and we will continue to monitor how the acquisition plays out over time.