M&G set to be quizzed on takeover as Square Mile rumours swirl

Bosses at asset management and insurance giant M&G are set to be quizzed by investors over a potential takeover swoop from Australian financial services Macquarie this week, as the firm updates the City with its full year results on Thursday.

The update will mark chief executive Andrea Rossi’s first update at the helm of the FTSE 100 firm after taking over in October, and comes at a crucial time in which rumours are swirling around the Square Mile of a potential multi-billion pound takeover.

Sky News reported last week that Australian Macquarie was in the early stages of exploring a takeover of the firm. The potential bid comes after London-listed asset manager Schroders also previously explored a takeover bid for the firm in 2021 before abandoning it on concerns of a culture clash.

M&G declined to comment on market speculation when approached by City A.M.

M&G has suffered a turbulent period since its spin off from Prudential in 2019 and Rossi and his executive team are looking to arrest outflows and a slide in managed assets. However, consensus figures compiled by M&G are predicting total assets under management to have tumbled to £340bn in the full year, down from £370bn in 2021.

Outflows are also expected to jump to £6.8bn, up from £6.3bn the previous year, after investors pulled cash from the market last year amid extreme volatility.

Shares in M&G have been lifted by over 30 per cent since Rossi took over, fuelled by M&A speculation despite his efforts to quash deal talk.. 

On the day he took over in October, Rossi told analysts a break-up or sale of M&G was “one option that I will not pursue”.

“To suggest otherwise, ignores a fundamental and unique advantage of one M&G. This is how I think about it,” he said.

However, analysts at UBS said that takeover talks would be among the top questions facing Rossi as he updates investors this week. 

“M&G remains our most preferred traditional UK life insurer ahead of [full year] results as we see multiple potential catalysts for the stock including recent M&A speculation,” Nasib Ahmed, UBS analyst wrote in a note to investors.

Ahmed said he expected a theoretical takeover valuation of between £6-8bn for M&G, putting a valuation of £4-5bn for insurance business and £2-3bn for its asset management arm. 

However, Rossi is also likely to face questions over plans to pay off the company’s substantial £3bn of debt.

“The company has already ring fenced £300m of capital to call debt in 2024,” Ahmed said. “However, we expect M&G to repay some of its debt early (most likely longer duration debt with higher coupons).”