American giant prepares to shell out ?900m for Egg

MBNA, the US credit card giant, is preparing an audacious £900m bid for Egg, the internet bank which is 79 per cent owned by the Prudential, the British insurer. The price is below the £1.6bn the Pru tried to get bidders to pay last year before pulling the auction when potential buyers refused to stump up the cash.

The credit card group is understood to have hired Lehman Brothers to advise it on a bid and is expected to make a formal approach to the Pru shortly. The UK life insurer, whose chief executive Jonathan Bloomer was ousted earlier this year, is now headed by former HBOS finance chief Mark Tucker, who is said to be anxious to cut a deal as soon as possible.

'Unlike Bloomer, Tucker was not around when Egg was floated at 160p in 2000; he is not emotionally attached to the bank in the same way,' said a City source. 'Tucker realises the thing has to go; yes, price matters, but not as much as it did with Bloomer.'

Egg started life as a savings bank, but its main operation today is centred around credit cards, so it would be an ideal fit for MBNA. British companies such as RBS last year considered bidding for Egg, but are no longer interested, according to analysts.

But a sell-off would thrill the City as the company has hinted that the proceeds could be returned to shareholders; they need pampering - many still haven't forgiven the Pru for asking them to furnish capital to help bolster the firm's position in the UK via a £1bn rights issue.

Investment bankers hoping for even bigger deals from the Pru over the next couple of years have begun to question where Tucker will take the group after Egg is sold. Some experts do not exclude the possibility of Pru merging with Aviva. There would be few monopoly considerations,' said one banker. Another scenario is where the Pru is 'taken out' by a continental rival such as Axa of France or Generali of Italy.

The decision last year to scrap the sale of Egg was viewed as major embarrassment for Bloomer.

In 2001, a bid masterminded by Bloomer for US insurer American General had to be abandoned after the Pru's offer was trumped by US rival AIG. In 2002, shareholders forced Bloomer to jettison a proposed executive pay deal worth £4m. The planned payment rankled at a time when bonuses to policyholders were being slashed. The Pru declined to comment on the possibility of a sale.