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A bolt out of the Pru

Colonial confirms it is buying Prudential's Australian and New Zealand assets for A$1.35 billion.

Monday, August 17th 1998, 12:00AM

by Philip Macalister

The big rationalisation of the financial services industry began today when Colonial confirmed it had bought the Australian and New Zealand operations of Prudential for A$1.35 billion.
Up until now much of the industry rationalisation had been confined to the small and mid-sized players.
While Prudential was relatively small in Australia compared to Colonial, the opposite is true in New Zealand. Prudential was one of the big four insurance companies, behind AMP and National Mutual, and it had about $2.2 billion in funds under management.

This acquisition, combined with the recent purchase of Legal and General propels Colonial to the second biggest life insurer by inforce and new annual premiums, and the fourth biggest fund manager in Australia.
In New Zealand the enlarged Colonial group moves up to number two position in the life insurance tables and the fourth largest fund manager.
The benefits of any acquisition come primarily through increased scale and business synergies. This deal is likely to see significant product rationalisation and job losses.
IPAC Securities general manager David van Schaardenburg says the purchase destroys Prudential's strategy of being a global network of asset managers covering each time zone.
"We expect over the next few months a major readjustment of Pru's funds as they are merged into Colonial's range with distribution issues, such as new masterfund offerings, to also face substantial change."
Somewhat ironically Colonial 11 days ago launched its Navigator master fund service which is very similar to Prudential's recently launched Pathfinder service.
Clearly there is only room for one of these services.
It is expected that this acquisition will have a major impact on the advisory networks of both companies. Currently Prudential has about 400 advisers, while Colonial has about 80 franchised advisers.
While the numbers are expected to be whittled down they will remain an integral part of the distribution network.
Prudential managing director John Molloy says, after meeting with Colonial, that "it is clear that the existing advisor force continues to be integral to the future plans for growth of the business - as are the multi-agency relationships."
The sale is due to be completed on September 30 (conditional on regulatory approvals) and it will be the end of the Prudential brand in Australasia.
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