Prudential deal with AIA on verge of collapse

British insurance giant Prudential has failed to renegotiate the price of its takeover of AIA, the Asian arm of US company American International Group (AIG).

The deal now looks set to collapse after AIA snubbed the lower price tag of $30.375 billion.

It emerged last week that the Pru, 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.

Prudential needs 75% of shareholders to approve the deal at a meeting next week. Many major investors have already said they would not approve the takeover unless Prudential trimmed between $3 billion and $5 billion from the original price of $35.5 billion (£24.3 billion).

However, should the deal fall through, the Pru faces the prospect of being broken up. Resolution group has already said it wants to buy its British business while AIA could bid for Prudential’s Asian operations.

The deal was set to provided the Pru with the opportunity to create South East Asia’s leading insurer.

Prudential shares were up almost 4% in mid-morning trading today to 561p – boosted by the prospect that the insurer will not be launching a record rights issue to fund the acquisition.

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