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Prudential deal may be scrapped if price not right

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by Kay Mitchell

It has been reported over the weekend that insurance giant Prudential may call off the deal with AIA, the Asian arm of US company American International Group (AIG), if the price is not right.

It emerged last week that Prudential, which is Britain’s second largest insurer, was renegotiating with AIA after investors were said to be unhappy with the deal, with the amount being paid of particular concern, as well as difficulties the company will face trying to integrate the business.

In March, Pru announced it had agreed to buy AIA, in a deal worth $35.5 billion (£24.6 billion).

In order to finance the deal, the insurance giant unveiled details of a £14.5 billion ($21 billion) rights issue – the UK’s biggest ever.

According to The Sunday Telegraph, Pru’s chief executive Tidjane Thiam has privately admitted that AIG must lower its asking price.

However, if this does not happen, it is likely that the deal will be abandoned, said the paper.

It requires the support of 75% of investors at a special meeting on 7 June if the deal is to proceed.

Reports say Pru is trying to reduce the price to less than $30 billion.

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News posted: May 30, 2010

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