AIG rejects Prudential's revised offer

In a setback to Prudential Plc's efforts to bolster its Asia presence, American International Group today rejected the British insurer's reduced $30.38 billion takeover bid for AIG's Asian life insurance unit.

The UK insurer said it is "considering its position" following AIG's rejection of the revised acquisition offer.

Prudential had initially announced a $35.5 billion deal to buyout AIA Group, the life insurance operations of AIG in Asia.

However, in the wake of many shareholders objecting to the transaction value, the UK insurer last week said it was in talks with AIG to revise the deal terms. AIG, which is 80 per cent owned by the US government, in a statement noted it would not consider revisions to the original terms of the proposed acquisition of AIA by Prudential.

"After careful consideration, the company will adhere to the original terms of its previously announced agreement with Prudential Plc for Prudential to acquire... AIA Group," the US entity added.

In a separate statement, Prudential said it had proposed revised terms whereby the AIA deal was valued at $30.38 billion, including a cash component of $23 billion.

"The board of Prudential is considering its position (after AIG rejection). A further announcement will be made when appropriate," the company noted. The proposed transaction is crucial for both sides.

While the proceeds from the deal would help AIG repay its huge debts to the US government, the acquisition of the AIA Group would strengthen Prudential's presence in the fast growing Asian market.

On the other hand, AIG refusing the revised offer also indicates that the US government, the majority shareholder, is probably not agreeing to a lower price for the AIA transaction.

Shareholders of Prudential are scheduled to vote on the proposed AIA deal and planned $21 billion rights issue on June 7.

Meanwhile, the failure of the proposed transaction puts a question mark over Prudential's listing in Hong Kong and Singapore, a move that was aimed to raise money for the AIA deal. Shares of Prudential were up 3.6 per cent at 561 pence in early trade on the London Stock Exchange.