UPDATE 1-US Treasury eyes AIA IPO as alternative to Pru deal

* US Treasury official: AIA IPO option to Prudential sale

* Treasury not lobbying Prudential holders to support deal
(Adds comments on merger)

WASHINGTON, May 26 (BestGrowthStock) – The U.S. Treasury’s chief
restructuring officer said on Wednesday if Prudential Plc
(PRU.L: ) shareholders reject a deal to buy American
International Group’s (AIG.N: ) main Asian life insurance unit, a
viable option is to return to an initial public offering plan.

Jim Millstein told reporters following a bailout oversight
panel hearing that AIG had prepared documents in Hong Kong for
an offering of shares in American International Assurance, but
in a “close call” the AIG board opted for the Prudential deal
instead. Prudential shareholders are to vote on the $35.5
billion cash and stock transaction on June 7.

“If the shareholders of Prudential in their infinite wisdom
determine this is not where they want to go, then the company
(AIG) will have a very viable alternative to go back to the
IPO,” Millstein said.

The Treasury owns about 80 percent of AIG’s common equity
as a result of government bailouts in 2008 and 2009.

A shareholder voting adviser, RiskMetrics (RISK.N: ), earlier
recommended that Prudential shareholders reject the AIA deal
because it carried a “full price” that required very high
growth rates to produce a “reasonable return.

Millstein, a former Lazard Ltd (LAZ.N: ) investment banker
who joined the Treasury last year to help unwind bailout
investments, said Treasury was not directly lobbying Prudential
shareholders to accept the merger plan. Nonetheless, he sang
the merger’s praises, saying it would create “real upside” for
U.S. taxpayers by taking Prudential shares in the deal.

“This is going to become a real powerhouse in Asia,” he
said. “We’ll see whether the Pru shareholders agree. They may
just want to just stay owners of a UK insurance company with a
small little operation in Asia rather than being the largest
pan-Asian life insurer.”

Millstein added that it was possible that market volatility
in Europe, rather than the deal’s terms, may have caused some
to rethink the merger plan.

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(Reporting by David Lawder, editing by Bernard Orr)

UPDATE 1-US Treasury eyes AIA IPO as alternative to Pru deal