Egg broken as Pru drops auction

Shares in Egg have plummeted by over 20% after insurance giant Prudential announced today it has scrapped the eight-month auction of its majority stake in the online bank. The U-turn is a major embarrassment for chief executive Jonathan Bloomer.

The insurance giant said today that after an 'extensive' process it had decided to retain its 79% share in the business as such a move 'offered better value to shareholders'.

Shares in Egg plunged more than 20%, dropping 32.75p to 111.25p and back to the depths reached before the sale talk began in January. The fall slashes Egg's market value to £948m and values Pru's 79% interest at under £750m.

Investors also turned on Prudential. It topped the FTSE 100 fallers' board with a 15 1/2p slide to 436 3/4p as analysts cast fresh doubts on Bloomer's record.

Roman Cizdyn, analyst at Commerzbank, said: 'To announce an auction, get everyones hopes up and not deliver puts a question mark on Bloomer's abilities.'

Despite strong financial results, Pru's chief executive has struggled to shake off the memories of a botched acquisition of US rival American General three years ago.

Relations with the City worsened last year as the Pru slashed its dividend by 40% in the first cut since 1914. This, despite the head of its investment arm M&G reminding companies of the benefits of strong divis.

Bloomer insisted there was nothing for him to be embarrased about and that potential buyers had simply not met Prudential's undisclosed valuation of the business. 'If you say you're embarrased if you don't sell, then it's inviting you to sell it at any price,' he said. 'A couple of people said they were interested in buying it so we started the process and we thought that was the right thing to do from our shareholders' point of view.'

Bloomer refused to comment on the commitments given to Egg over Prudential's continuing involvement.

He added that it was a 'complete coincidence' that one of the rumoured bidders, Royal Bank of Scotland, put out results today. Other potential buyers were US credit card groups Capital One and MBNA.

Egg's fortunes have been scrambled by a disastrous foray into France which has cost it £280m in less than years.

Egg chief executive Paul Gratton said: 'Egg is now well positioned to execute its business plan successfully.'

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