Prudential seeking better terms for AIA deal
Updated: 2010-05-29 07:31
(HK Edition)
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Prudential Plc confirmed Friday it has been negotiating for better terms for its proposed acquisition of AIA Group Ltd after shareholder criticism that the UK insurer is overpaying for AIA.
"We note the recent press speculation regarding talks between Prudential and American International Group Inc (AIG). We confirm that discussions regarding the current status of the transaction have taken place between Prudential and AIG and are continuing," the UK insurer, which recently listed its shares in the local stock exchange, said in a statement filed with the exchange.
However, it said these discussions "may or may not lead to a change in the terms of the combination of AIA Group Ltd and Prudential."
The prospect of better terms for the AIA deal helped boost Prudential's share price: The stock closed up HK$2.50, or 4.2 percent, to HK$61.50 in Hong Kong trading Friday.
Prudential has offered $35.5 billion to take over AIA, the main Asian life insurance unit of AIG.
Prudential Chief Executive Officer Tidjane Thiam was handed the chance to make a bid for AIA after his firm's share price almost tripled. However, the recent fall - the biggest decline in equity markets since the financial crisis - may derail his plans.
Thiam said when he announced the offer in March that Prudential had "earned the right" to buy AIA after the stock jumped 191 percent to 602.5 pence in 12 months in London trading.
However, as global equity markets slumped recently, with the MSCI World Index plunging about 11 percent in the last six weeks, Prudential shareholders have started to complain that Prudential is overpaying for AIA.
Meanwhile, falling investor confidence sparked by Europe's sovereign debt crisis has hampered corporate fundraisings in the past two months while Thiam is looking to shareholders for $21 billion, the biggest rights offer for an acquisition on record.
"It's probably the least ideal market in which to raise capital," said James Buckley, a London-based fund manager at Baring Asset Management Ltd. "The market is not completely closed for small rights offers, but for major deals like Prudential's, it's inevitably tough."
In an apparent bid to appease shareholders and investors, Thiam is seeking better terms for the AIA deal, market sources said.
Thiam was in New York Thursday to make his case, in person to AIG executives, that the price for AIA should be cut, said a person with knowledge of the situation.
"We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it," said Mark Herr, a spokesman for New York-based AIG, in a statement late Thursday.
Speculation the deal would collapse was "unfounded," said Prudential spokesman Ed Brewster.
Bloomberg news-China Daily
(HK Edition 05/29/2010 page3)