Prudential Renegotiates With AIG

Arthi Gupta
28 May, 2010
New York City

British insurer Prudential Plc confirmed today that it is renegotiating with American International Group Inc. regarding purchase terms of AIG''s Asian insurance unit, American International Assurance Co. Ltd. or AIA.

[R]8:15 AM New York – British insurer Prudential Plc confirmed today that it is renegotiating with American International Group Inc. regarding purchase terms of AIG''s Asian insurance unit, American International Assurance Co. Ltd. or AIA.[/R]

British insurer Prudential Plc confirmed today that it is renegotiating with American International Group Inc. regarding purchase terms of AIG''s Asian insurance unit, American International Assurance Co. Ltd. or AIA.

UK media speculated yesterday that Prudential is in talks with AIG to reduce the $35.5 billion purchase price for AIA.

Prudential said the discussions may or may not lead to a change in the terms of the combination of AIA and Prudential.

Tidjane Thiam, the Chief Executive Officer of Prudential, was reportedly in New York on Thursday to make his case in person to AIG executives that the price for AIA deal should be cut

The move by Prudential came after its shareholders complained that the deal was too expensive, especially because the company plans to sell $20 billion worth of new shares to help finance the deal. Shareholders are set to vote on the deal at the company''s June 7 annual general meeting.

Prudential needs approval of 75% of the shareholders for the AIA deal. Institutional investors with more than 15% of Prudential stock and private shareholders owning almost 5% plan to oppose the deal.

On March 1 that AIG agreed to sell Hong Kong-based AIA to Prudential. The total consideration includes $25 billion in cash, $8.5 billion in face value of equity and equity-linked securities, and $2.0 billion in face value of preferred stock of Prudential. AIG intends to use the cash proceeds towards repaying the Federal Reserve Bank of New York, which in December exchanged $25 billion of its AIG debt for preferred equity in AIA and another AIG life insurance unit, American Life Insurance Co. or Alico.

The UK based Prudential is not related to the US based Prudential Financial.

In Thursday''s regular trading session, PUK closed trading at $16.06 per share on the NYSE, while PRU.L is currently trading at 543 pence per share, down 4.50 pence or 0.82%, on the London Stock Exchange.

AIG closed Thursday''s regular trading at $36.46 per share on the NYSE.