AIG refuses to cut AIA takeover price for Prudential

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US insurer AIG rejected on Tuesday the request of rival Prudential to cut the takeover price for its Asian unit, threatening the huge deal already facing a shareholder revolt.

"After careful consideration, the company will adhere to the original terms of its previously announced agreement," American International Group said in a statement.

"The company will not consider revisions to those terms," it added.

Prudential, which had asked AIG to cut its price for AIA from 35.5 billion dollars (28.9 billion euros) to 30.375 billion dollars, said that its board was "considering its position" after the rebuff.

The takeover would be the biggest-ever in the insurance sector, transforming Prudential into the world's top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.

Investors welcomed the announcement, bidding up Prudential shares 3.51 percent to 560.5 pence in early trading in London, bucking weaker trend on the broader market, which was down nearly two percent.

"AIG has said that it will not consider revising the terms of the originally agreed deal and this poses a major threat the success of the acquisition," said analyst Joshua Raymond at spread betting firm City Index.

"Investors had been concerned that Prudential were paying too high a price for AIA, and with the deal now looking on the verge of collapse, Prudential's share prices have received a boost," he added.

Prudential agreed in March to the original 35.5-billion-dollar takeover price for AIA but has since scrambled to get a reduction as some shareholders such as asset manager F&C baulked at the cost.

AIG's rejection of the lowered offer dealt a painful setback to Prudential's chief executive Tidjane Thiam's high stakes gamble to transform his group into an international insurance giant.

Prudential needs 75-percent approval from its shareholders at the June 7 vote to proceed, an increasingly difficult prospect given Prudential's failure to secure a lower price.

"The markets clearly believe the deal that would have seen Prudential make its largest ever acquisition and that would be accompanied by a record breaking rights issue is dead in the water," said analyst Howard Wheeldon at BGC Partners.

"By rejecting Prudential's request to cut the agreed 35.5 billion dollar ticket price of AIA Group assets it seems to me that, inadvertently or not, AIG has decided also that it is not prepared to be involved saving the career of Prudential CEO Tidjane Thiam," he added.

© 2010 AFP

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