AIG has refused to cut the terms of the proposed £24.5bn sale of its Asian business AIA to Prudential making a deal extremely unlikely.
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 that “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 £21bn 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. Geffen says: “We currently have no comment and are awaiting the Pru’s statement on what they intend to do next, which we expect very shortly. Cleary the attempt to reduce the price has not worked and it would appear inconceivable that they can push on with this rights issue to buy assets at a price that they themselves now admit is far too high.”
Speaking on Friday, Cavendish Asset Management senior fund manager Paul Mumford said Prudential’s takeover of AIA was “untenable” even if the insurer is 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” to ask investors to back.
He said: “The Pru has woefully misread the appetite of shareholders to back both a deal of this size and of this complexity.”