AIG: Prudential AIA Offer Won't Be Accepted

06/01/2010 06:11 am ET | Updated May 25, 2011

BANGKOK — U.S. insurer AIG said Tuesday it won't accept a lower offer for its Asian insurance business from Prudential, potentially scuttling the multibillion dollar deal.

London Stock Exchange-listed Prudential PLC was trying to lower the $35.5 billion price agreed for the purchase of AIA, which is the Asian insurance business of American International Group Inc.

"After careful consideration, the company will adhere to the original terms of its previously announced agreement with Prudential," AIG said in a statement. "The company will not consider revisions to those terms."

The deal has faced resistance from Prudential shareholders, who believed the price was too high. Prudential confirmed that it had made a reduced offer of $30.375 billion.

"The board of Prudential is considering its position," the company said in a brief statement to the London Stock Exchange. "A further announcement will be made when appropriate."

Prudential needs to line up support from holders of 75 percent of its shares by June 7. If the AIA deal falls through, Prudential will owe AIG a termination fee of $230.6 million.

Opponents of the deal have formed a Prudential Action Group, which is seeking to muster support for a vote of no confidence in the Prudential's chief executive Tidjane Thiam. The group claims that at least 15 percent of shareholders intend to vote against the deal.

AIG, which received more than $180 billion in aid from the U.S. government during the financial crisis, hoped to raise a total $51 billion from the Prudential deal and the sale of its American Life Insurance Co. division to MetLife Inc.

Prudential said its lower offer included $23 billion cash, $5.375 billion worth of shares in the combined companies and $2 billion in notes.