Prudential Buys AIG Asian Unit for $35.5 Billion

123jump.com Staff
01 Mar, 2010
New York City

AIG agreed to sell its Asian unit for $35.5 billion to Prudential Plc. The deal will help the troubled U.S. insurer to raise capital to repay U.S. Federal Reserve and Treasury $185 billion bailout. Prudential will raise $20 billion in a rights offering at 40% discount.

[R]9:50 AM New York – AIG agreed to sell its Asian unit for $35.5 billion to Prudential Plc. The deal will help the troubled U.S. insurer to raise capital to repay U.S. Federal Reserve and Treasury $185 billion bailout. Prudential will raise $20 billion in a rights offering at 40% discount.[/R]

Prudential Plc agreed to acquire Asian life insurance unit of American International Group Inc for $35.5 billion.

Prudential will pay $25 billion on cash and $10.5 billion in securities and Prudential stock. Prudential will raise $20 million in a rights offering and $5 billion in bond offering.

Prudential will pay $25 billion in cash and $10.5 billion in stock for AIA Group Ltd that was founded in Shanghai in 1919 and has 20 million customers

After the transaction AIG will control 11% of Prudential.

Chief Executive Officer Tidjane Thiam made his first purchase after he was appointed the position five months ago.

AIG in New York trading gained as much as 9% and Prudential Plc in London trading declined 13% to 526 pence after the deal announcement. Prudential has gained more than 100% in last one year and AIG has rebounded 13.5% to $28.10.

AIG had explored the sale of its Asian unit in a public offering in Hong Kong and Shanghai but decided for a speedier transaction. AIG received $185 billion from the U.S. Federal Reserve and U.S. Treasury.

The deal puts Prudential in a firm place to leverage the impending growth in Asia as incomes rise and population matures in age. Prudential will inherit 20,00 employees and 250,000 strong networks of agents across Asia and Australia.

AIA in Asia insurance life, accidents and health and private retirement plans and also sells wealth management services.

Credit Suisse Group AG, HSBC Holdings Plc and JP Morgan Cazenove are leading underwriting team to raise $20 billion and stock is expected to be places at 40% discount to the current price.

The bond and stock offering is expected to cost Prudential nearly $1 billion according to chief executive Thiam.

Prudential will be required to sell its stake in joint ventures in India and China. The company is in talks with regulators and will be forced to divest its stakes in both countries.

Indian regulators have informed the company that it cannot have two licenses. Both Prudential and AIG have separate joint ventures in India. Prudential is in talks with Chinese regulators to keep its stake in Citic Group.

Insurance companies in China and Japan traded higher.