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Prudential-AIA deal may collapse as AIG refuse to lower $35.5 billion bid

01 Jun 2010

1

Prudential Plc, Britain's largest insurer's $35.5 billion deal to acquire the Asian life-insurance arm of the American International Group, Inc. (AIG) is facing a potential collapse after the US-based insurer refused to lower the cost of the deal.

AIG, the stricken insurance and financial services firm, had signed a definitive agreement in early March 2010 with Prudential for the sale of its Asian assets, the AIA Group Limited (AIA) for $35.5 billion. (See: AIG sells Asian assets to Prudential for $35.5 billion)

But the deal ran into trouble with Prudential shareholders, who strongly opposed the cost, which even according to analysts, was steep for AIA.

Analysts had suggested that a lowered $30-billion offer could possibly see shareholders drop their opposition and go along with the transaction if AIG accepted the revised offer.

The French-speaking former minister in the government of Ivory Coast Tidjane Thiam, who has been appointed the chief executive of Prudential and is the architect of the deal, sent a revised offer over the weekend and dropped the deal price by $5.125 billion to $30.375 billion.

Prudential's revised offer consisted of $23 billion in cash, approximately 2.16 billion worth newly-issued shares of New Prudential with a value of $5.375 billion based on the theoretical ex-rights price for Prudential's ordinary shares of 171.31 and $2.0 billion in aggregate principal amount of perpetual tier one notes to be issued by Prudential.

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