P & O ... Nov10

Pacific & Orient Bhd’s (P&O) insurance business is believed to still be on the radar of other foreign parties despite Prudential Holdings Ltd dropping out of the acquisition talks for the local general insurer.

Sources say one of the interested parties eyeing the insurance business of P&O is an insurer from the North Asian region. They are exploring the possibility of acquiring the business... The insurer is studying the company [P&O] and should they decide to go ahead with the buy, they will write to Bank Negara Malaysia for approval to start formal negotiations.

One of the reasons the talks between P&O and Prudential fell through was because both parties could not agree on the pricing. It is understood that the asking price for P&O’s insurance business is somewhere along the region of two times price-to-book ratio… that is using the latest local general insurer transaction — Jerneh [Insurance Bhd] — as a benchmark.

The book value of P&O’s insurance business stood at RM160 million in July 2010.

Apart from the latest set-back, P&O’s share price may have also come under pressure due 
to a potential share overhang from its recently completed private placement exercise. The company had undertaken a 10% private placement exercise of 5.25 million shares at 99 sen per share. The shares were listed on Oct 20 2010.

Following the exercise, P&O’s share base increased to 236.34 million shares. Its net assets per share stood at 72 sen on June 30 2010.