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AIA-Pru deal is unlikely as AIG refuses to drop price

AIG has refused to cut the terms of the proposed £24.5bn sale of its Asian business AIA to Prudential, making a deal look extremely unlikely at the time Money Marketing went to press.

Prudential has come under fierce pressure from its shareholders to cut the price tag of the deal and has been in talks with AIG about a revised offer for AIA. However, AIG has released a statement saying “after careful consideration” the company will “adhere to the original terms of its previously announced agreement with Prudential”. “The company will not consider revisions to those terms,” says AIG.

Prudential needs 75 per cent shareholder support for the deal at a vote on June 7 but this is extremely unlikely given the investor rebellion. Prudential says it had revised its offer to £20.7bn and that the board is considering its next move.

Shareholders, led by Neptune chief investment officer Robin Geffen, have raised concerns about the deal and had committed to voting it down unless it was renegotiated with better terms for the Pru.

He says: “It would appear that common sense has prevailed. The feeling among most is that the Pru’s purchase of AIA is no longer on the table after a revised lower price was rejected. I sincerely hope the deal is off. From the beginning, it has been an absurdly ambitious attempt by the Pru to buy a large Asian company at a very high price, with a very unclear strategy.”

On Friday, Cavendish Asset Management senior fund manager Paul Mumford said Pru’s takeover of AIA was “untenable” even if the insurer was able to renegotiate the price as it has lost the confidence of shareholders.

Mumford says even with a smaller price tag, the proposed acquisition of AIG’s Asian arm is “too expensive and too risky”.

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