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Pru looks to renegotiate AIA deal

Prudential has confirmed it has reopened talks with AIG in a bid to drive down the £24.5bn price tag of its proposed acquisition of the insurer’s Asian arm, AIA.

The firm says in a press statement this morning: “We note the recent press speculation regarding talks between Prudential and American International Group.

“We confirm that discussions regarding the current status of the transaction have taken place between Prudential and AIG and are continuing. These discussions may or may not lead to a change in the terms of the combination of AIA Group Limited and Prudential.”

Prudential halted trading in its Hong Kong listed shares this morning amid market talk the insurer may cut the value of the deal.

But Prudential shares rose 1.69 per cent when trading resumed on Friday afternoon, Hong Kong time, after the confirmation that it was seeking to renegotiate the price for AIA.

The news reportedly comes after US Treasury Secretary Tim Geither urged the insurer to salvage the deal as floating AIA in Hong Kong, the fall back plan the American government has been exploring, is understood to no longer be an option due to deteriating market conditions.

Prudential’s shares jumped nearly 7 per cent to 547.5p yesterday as rumours swept the market that the deal had fallen through. They opened up 1.4 per cent today.

Prudential needs 75 per cent shareholder support at a crucial vote on June 7 but an investor rebellion is gathering momentum both in the UK and in the US.

Neptune chief investment officer Robin Geffen, who was vehemently against the original takeover plans, says institutional shareholders with over 15.1 per cent of Prudential’s shares have already indicated they intend to vote no to the deal.

Meanwhile, shareholders holding a further 4.87 per cent have declared their intention to vote no through the Prudential Action Group website and phoneline, according to Geffen, giving a total of almost 20 per cent.

He says: “There is clearly a building momentum of people who are intending to vote against the Prudential’s proposal to buy AIA. This deal is very expensively priced. Shareholders are being asked to pay $32.5bn for a company currently generating $1.6bn of profit.

“The deal does not give access to India and the position in China would result in a company that is not of a scale where it could hope to compete with local giants.”


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