Prudential/AIA deal collapses

| June 2, 2010 | 0 Comments

British insurance giant Prudential has abandoned its $35.5 billion (£24.6 billion) takeover of AIA, the Asian arm of US company American International Group (AIG).

Several Prudential shareholders said they would not approve the takeover unless the Pru trimmed between $3 billion and $5 billion from the original price.

Pru attempted to renegotiate the deal and offered a lower price tag of $30.375 billion, which AIA snubbed.

As a result, Pru has abandoned the deal after AIA said yesterday it would not “not consider” any revision to the terms of the deal.

Prudential, which is Britain’s second largest insurer, had planned to fund the acquisition by launching a £14.5 billion ($21 billion) rights issue – the UK’s biggest ever.

Commenting on the collapse of the deal, Prudential chairman, Harvey McGrath, said: “We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG.

“Unfortunately, it has not been possible to reach agreement… we are therefore withdrawing from the transaction,” he added.

However, the failure of the deal has raised fears about the future of Mr McGrath and the insurer’s chief executive, Tidjane Thiam.

Meanwhile, Pru said it faced costs of £450 million ($653 million) relating to the withdrawal of the deal, which includes a break-up fee of £152.6 million.

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

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