American International Group, the bailed-out insurer, remains in negotiations to salvage the sale of its main Asia unit after Prudential requested a lower price to win shareholders’ approval.
Prudential asked that the $35.5 billion price for AIA Group be cut to about $29 billion to $30 billion, and New York-based AIG is seeking at least $32 billion, said a person with knowledge of the talks who declined to be identified because they are private.
AIG was forced to reopen negotiations when some of London-based Prudential’s biggest shareholders said they may reject the transaction at a June 7 meeting. The Treasury Department, which helped rescue AIG in 2008, said it hadn’t considered alternatives to the original terms as of late May 28, and AIG signalled it has other options for AIA, according to a person briefed on the stance of management.
“The deal’s not dead until it’s dead,” said Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group. “Treasury could just be playing hardball here. There will be a lot of posturing from both sides.” He recommends buying Prudential shares.
Treasury spokesman Andrew Williams said May 28, that the department hasn’t weighed alternatives to the $35.5 billion contract announced in March and that “AIA is a valuable business for which there is significant interest.” AIG spokesman Joe Norton, and Prudential’s Edward Brewster didn’t immediately return calls seeking comment.
Prudential Chief Executive Officer Tidjane Thiam needs 75 per cent of investors to support a rights offer at the insurer’s annual general meeting. Prudential investors including BlackRock and Fidelity Investments said the takeover was too expensive, a person with knowledge of the matter said last week.
The US government, which took a stake of almost 80 per cent in AIG after the 2008 rescue, is willing to allow the insurer to lower the price, people familiar with the matter said last week.
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The $35.5 billion deal announced in March included about $25 billion in cash and the rest in securities linked to Prudential shares. Prudential’s latest offer of about $30 billion mostly reduced the amount of securities AIG would receive, said a person with knowledge of the discussions.
Under the original terms of the sale, the 162-year-old British insurer had to pull off a $21 billion rights offer, the biggest for an acquisition in history, at a time when Europe’s sovereign debt crisis was sidelining corporate fundraisings worldwide.
At least 19 companies have postponed or withdrawn $5 billion in US debt sales since April 13, data compiled by Bloomberg show. Investment banking fees from acquisition advice, share and bond sales in western Europe dropped 17 per cent in the first four months of 2010 compared with the previous year, New York-based research firm Freeman & Co Said.
AIG had negotiated “a very aggressive price” for AIA, CEO Robert Benmosche told the Congressional Oversight Panel on May 26 during a hearing into the company’s bailout. The unit may be valued at slightly less than $30 billion in a public offering, according to an analysis done before the March announcement by Chapdelaine Credit Partners managing director Angelo Graci.