Prudential deal exit paves way for IPO

08:50, June 03, 2010      

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UK insurer Prudential is pulling out of its bold $35.5 billion takeover bid of AIG's Asian life insurance arm.

The widely expected move Wednesday came after American International Group (AIG) rebuffed Prudential's attempt to lower its offer, and could pave the way for American International Assurance's (AIA) IPO, potentially worth up to $15 billion.

"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG. Unfortunately, it has not been possible to reach an agreement," Prudential Chairman Harvey McGrath said in a statement. "We are therefore withdrawing from the transaction."

Prudential estimated the cost of the failed AIA transaction so far at about $659 million.

AIG Chief Executive Robert Benmosche was in favor of accepting a revised deal as it offered more liquidity, and sooner, a person familiar with the situation told Reuters.

But the AIG board decided against doing so.

AIG is likely now to revive a planned initial public offering (IPO) of AIA. But there are doubts whether an IPO could fetch the same valuation as offered by Prudential.

Benmosche told employees in an internal memo that AIG would have several options to consider regarding AIA - more than it did in March.

AIG, nearly 80 percent-owned by the US government, also would have more flexibility on timing, he said.

These options include selling parts of the AIA business by geography, two of the sources said.

Source: Global Times


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