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Prudential’s (PRU.L) bid for rival AIG’s (AIG.N) Asian unit appeared close to collapse after AIG rejected the British insurer’s lowered offer of US$30.38 billion ($42.6 billion) in cash and shares.
The deal’s unravelling could cast doubt over the future of Prudential Chief Executive Tidjane Thiam less than a year after he took the top job.
Prudential, which had asked for a reduction of US$5 billion in talks with AIG over the weekend, is now likely to abandon the bid formally rather than push it through on its original terms, investors and analysts said.
“Personally, I think the good thing would be for the Pru to withdraw gracefully,” said Paul Mumford, senior fund manager at Cavendish Asset Management.
“If they do put it to a vote, I’d be very surprised if shareholders vote it through.”
Prudential shares were up 3.8% at 562p by 0800 GMT, outperforming a 1.4% drop in the European insurance sector.
Prudential was dramatically forced to reopen price negotiations with AIG last week because it might fail to attract the required 75% approval at an investor vote scheduled for June 7. The takeover is to be funded in part by a record $21 billion rights issue.
Prudential’s board is considering its position and will issue a further statement “when appropriate,” the company said on Tuesday.
“With AIG rejecting the lower offer, the possibility of the deal going through would be quite low at this time given Pru’s shareholder response so far,” said Sally Yim, an analyst with credit rating agency Moody’s in Hong Kong.
Thiam has championed the AIA takeover — the industry’s biggest — arguing that it gives the 162-year-old British insurer a rare opportunity to grab a commanding presence in Asia, the world’s fastest-growing financial services market.
A failure of the deal would also be a blow to AIG boss Robert Benmosche, who wants to use the proceeds of the AIA disposal to repay part of the US$132 billion bailout the U.S. insurer received at the height of the financial crisis.
