Deal between Prudential and AIA collapses

Monday, June 7, 2010

Leading insurance providers Prudential has confirmed that their recent attempt to acquire AIA, the Asia life insurance business of US group AIG (American International Group), has collapsed. The insurance firm, based in the UK said that it has withdrawn from a £24 billion deal to buy AIA after failing in its bid to force AIG to reduce their higher asking price after shareholders revealed concerns over the price and chief executive Tidjane Thiam failed to renegotiate the deal.

AIG made a statement in response to the collapse of the deal last week saying they would not "not consider" any revision to the terms of the deal, which would have been the largest insurance merger and acquisition deal ever to have happened.

According to reports, the failed takeover bid has left Prudential with a massive £152.6 million termination fee, which will have to be paid directly to AIG, as well as advisory costs and fees. The total costs associated with the transaction so far are believed to be around the £450 million mark.

Furthermore, there are fears that the disarray sparked by the collapse of the AIA deal could leave Prudential vulnerable to a takeover and break-up.

Despite failing to secure the ground-breaking deal, Mr Thiam said he still viewed Asia as "offering excellent growth opportunities".

"We agreed with shareholders that a renegotiation of the terms was necessary given market movements, but it has not proved possible to reach agreement," he added.