Prudential Considers Options for Eastspring Asset Management

Prudential (LON:PRU) is reportedly exploring various strategies for its asset management arm, Eastspring, including the possibility of selling a minority stake.

According to a Bloomberg report, Eastspring might be valued at approximately $3 billion, with discussions indicating the potential sale of a 30% stake in the business.

This strategy could facilitate a partnership, allowing Eastspring to broaden its focus on areas such as private credit and dollar-denominated assets.

UBS analysts have expressed their views on this development, revealing that the estimated $3 billion valuation for Eastspring is below their expectations. They believe Eastspring's value could range between $3.7 billion and $7.7 billion based on a sum-of-the-parts analysis.

The discrepancy in valuation stems from Eastspring's inclusion of a joint venture with ICICI Bank in India, which UBS values between $2.1 billion and $4.1 billion.

Prudential's asset management business, comprising both internally and externally managed assets, plays a crucial role in the company's operations, managing $142 billion in internal assets linked to Prudential's insurance business, $56 billion in external assets, and a 49% stake in the Indian joint venture valued at $48 billion.

Despite Eastspring's considerable size, UBS analysts point out that Prudential’s overall market value does not accurately reflect the substantial earnings multiple of its asset management division.

In valuation terms, Eastspring’s earnings multiple is estimated between 12.5x and 25.8x, which is a premium compared to Prudential’s group earnings multiple of about 9x for the upcoming 12 months.

UBS suggests that Prudential’s stock price may not fully represent Eastspring’s business value, particularly given the higher earnings multiples associated with its asset management operations.

As of 5:42 ET (10:42 GMT), Prudential's shares had declined by 2.6%.