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Prudential ups its IPO ante to $3.8 billion

In what had already shown signs of being the largest insurance demutualization ever, Prudential Insurance Co. of America has filed to increase the size of its initial public offering (IPO) of stock by 25 percent.

Prudential's IPO would complete the transformation of the company from a policyholder-owned mutual insurance company to a shareholder-owned and publicly traded company — a process known as demutualization — and could raise as much as $3.8 billion.

The insurance giant plans to sell 110 million shares of common stock for between $25 and $30 each in an IPO to take place Dec. 13, 2001. In Prudential's SEC filings, the insurer says that the IPO and concurrent offerings are not expected to raise the full $4.4 billion needed to fully compensate the policyholders who chose cash or policy credits in return for their ownership of the company.

The insurance giant plans to sell 110 million shares of common stock for between $25 and $30 each.

After the IPO, Prudential will issue an estimated 456 million shares of stock to eligible policyholders as part of the demutualization, and will set aside a further the 12.3 million for employee stock options.

While Prudential cleared the last regulatory obstacle to its demutualization on Oct. 15, 2001, when New Jersey regulators gave the insurer the OK to go public, the insurer still faces a lawsuit that calls the demutualization illegal in a dispute over who should receive the proceeds of the IPO.

Prudential plans to include policyholders of its subsidiary Pruco Life Insurance Co. and owners of other "nonparticipating" policies in the distribution of cash, policy credits, or stock in the newly demutualized company ¹ a move that the lawsuit claims is unfair to all of Prudential's other policyholders.

"To put it simply," reads the complaint, "these nonparticipating contractholders have never owned 'a piece of the rock' and should not be allowed . . . to receive a share of it at the expense of participating contractholders."

Laurita Warner, a spokesperson for Prudential, declined to comment on the lawsuit, citing Securities and Exchange Commission rules.

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