UPDATE 3-Pru may exit some Asia markets post-AIA buy -sources

* Pru may exit marginal Asian markets -sources

* Australia, NZ, Taiwan, Korea among those likely markets

* Divestments may raise more than $1 bln – source

* Pru enlists 30 global, Asian banks in rights syndicate

* Pru shares up 1.6 pct, broader market marginally firmer

(Adds fresh analyst reaction, links to Breakingviews column,
updates shares)

By Denny Thomas and Saeed Azhar

HONG KONG/SINGAPORE, March 5 (BestGrowthStock) – Prudential Plc
(PRU.L: ) may quit some countries in Asia should it seal a $35.5
billion buy of American International Group’s (AIG.N: ) AIA,
sources said on Friday, allowing the bulked-up insurer to focus
on key markets.

Australia, New Zealand, South Korea and Taiwan are four
markets Britain’s Prudential may decide to leave due to low
market share, said the sources, who are directly involved with
the deal. One source said asset sales could potentially top $1
billion.

The sources declined to be named as they are not authorised
to comment publicly on the deal.

Prudential’s planned acquisition of Hong Kong-based American
International Assurance (AIA), American International Group’s
(AIG) Asia life insurance group, still has some way to go before
it closes.

Prudential said Singapore sovereign wealth fund GIC and
Qatar Holding LLC had committed to underwriting a significant
portion of its planned $20 billion rights issue that would help
fund the AIA deal.

Prudential shares were near flat at 514 pence in London at
1412 GMT, down about 15 percent compared with their close at the
end of last week, before news of the AIA deal emerged. The stock
was down by more than 20 percent earlier this week due to
concerns over the dilutive effect of the cash call.

Prudential is buying AIA as it bets on soaring demand in
Asia for personal financial services. The move also allows it to
swallow a top competitor that had planned to spin-off on its own
from AIG through a $10 billion to $20 billion Hong Kong IPO.

The deal is a transformative one, the largest-ever in the
insurance industry, and one that that will immediately change
Asia’s insurance industry landscape.

“You can bet that a lot of strategic players and financial
buyers are already positioning themselves for the coming
activity,” one of the sources said, referring to the potential
divestments that could come from the combination.
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For a Reuters Breakingviews column, click [ID:nLDE6240SC]
For more stories on Prudential/AIA, click [ID:nN0199388]
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In South Korea, Prudential-AIA would rank No.5 in terms of
market share, while in Australia it would be 14, with just 0.5
percent market share, according to a person working on the
transaction. In New Zealand, it would rank sixth.

“In Australia and New Zealand, AIA was focusing on
independent financial adviser business, which is not the
traditional agency based business that Prudential focuses on,”
said Sally Yim, vice president at Moody’s in Hong Kong and
senior analyst who covers Asia-Pacific’s insurance industry.

A Hong Kong based spokesman for Prudential declined comment.
An AIA spokeswoman did not return a message seeking comment.

Prudential has a joint venture in India with ICICI, a
partnership that is much bigger than AIG’s link-up with India’s
Tata Group. Once a deal between AIG and Prudential is completed,
Tata is expected to buy out AIG’s 26 percent stake or find
another partner as Prudential would not be allowed to have two
joint ventures in the same country.

Prudential-AIA may face a similar situation in China, where
foreign companies are not allowed to have more than one joint
venture partner. Citic-Prudential Insurance is a 50-50 venture
with a half percent share of China’s market.

AIA in China is 100 percent-owned by AIG and has a 1 percent
market share. While both shares are small, China is viewed as a
key growth market for the combined company.

However, the Shanghai Security News reported on Friday that
new draft rules under consideration could allow the two insurers
to operate separately in China.

WELL-RECEIVED

Prudential said GIC and Qatar Holdings committed to
underwriting a big chunk of the $20 billion rights issue, news
that analysts said would help soothe worries over the outcome of
the cash call.

“That is supportive,” said S&P Equity Research analyst Tony
Silverman.

“I don’t think the price they’re paying for AIA is a bargain
in itself, although it’s probably reasonable. It’s a big rights
issue which would have caused some indigestion anyway.”

GIC already owns a 0.5 percent stake in Prudential, while
Qatar does not appear to rank among the group’s shareholders,
signalling the UK insurer is inviting new investors to make the
deal a success.

Prudential said in its filing that demand for primary
underwriting was well in excess of the size of the rights issue.

Credit Suisse, HSBC and JPMorgan Cazenove are acting as
joint global co-ordinators and joint bookrunners, it said.

Prudential said it has enlisted more than 30 global and
Asian banks as joint lead managers, co-lead managers and
co-managers for the fund raising.

Stock Market Research

(Additional reporting by Michael Flaherty in HONG KONG, Kevin
Lim in SINGAPORE, Myles Neligan in LONDON and Narayanan
Somasundaram in SYDNEY; editing by Valerie Lee and Karen Foster)

UPDATE 3-Pru may exit some Asia markets post-AIA buy -sources