Prudential PLC said yesterday it is talking with US insurer AIG about the terms for the proposed sale of AIG’s Asian unit, AIA, a deal that faces strong resistance from Prudential shareholders.
Some shareholders are organizing opposition to the US$35.5 billion price agreed for AIA, and needs to line up support from holders of 75 percent of shares by June 7.
“We confirm that discussions regarding the current status of the transaction have taken place between Prudential and AIG and are continuing,” Prudential said in an announcement to the London Stock Exchange. “These discussions may or may not lead to a change in the terms of the combination of AIA Group Limited and Prudential.”
Prudential shares were up 1 percent at £0.553 in early trading on the London Stock Exchange.
A number of analysts believe Prudential agreed too high a price for AIA.
Opponents of the deal have formed a Prudential Action Group, which is seeking to muster support for a vote of no confidence in the Pru’s chief executive, Tidjane Thiam. The Action Group claims that at least 15 percent of shareholders intend to vote against the deal.
Prudential has announced a rights issue — 11 new shares at £0.104 each for every two existing shares — to raise US$20.9 billion to help finance the deal. The company also plans US$5.4 billion in hybrid debt financing.
American International Group Inc, which received more than US$180 billion in aid from the US government during the financial crisis, hoped to raise a total US$51 billion from the Prudential deal and the sale of its American Life Insurance Co division to MetLife Inc.
“The key question remains how much the price needs to be reduced by to convince the skeptics to vote yes,” said Eamonn Flanagan, analyst at Shore Capital.
“Our view would be that a US$30 billion revised price would nudge many over the line, although the transaction and integration risks are likely to remain insurmountable for many others,” he said.
The other big question, he added, was whether AIG would accept such a big cut in price.