UPDATE 6-UK’s Pru wants to pay less to save AIA deal

* Says renegotiating deal with AIG

* Wants to reduce price to about $30 billion -source

* $5 bln cut “would get more people on side” -investor

* Prudential shares down 1.1 percent in London

(Adds fresh analyst comment, updates shares)

By Myles Neligan and Cecilia Valente

LONDON, May 28 (BestGrowthStock) – Prudential (PRU.L: ) has entered
talks to cut its $35.5 billion offer for for AIG’s (AIG.N: ) Asian
life insurance arm, in a last-ditch bid to salvage a deal
criticised by shareholders as too expensive.

Prudential chief executive Tidjane Thiam’s future hinges on
the success of his audacious bid for American International
Assurance, (AIA) launched by the former Ivory Coast government
minister in March after less than a year in the top job.

The UK’s biggest insurer wants to cut the price to about $30
billion, a reduction of 15 percent, one source close to the deal
said, asking not to be named.

“Discussions regarding the current status of the transaction
have taken place between Prudential and AIG and are continuing,”
Prudential said in a statement on Friday.

“These discussions may or may not lead to a change in the
terms of the combination,” it said.

A collapse of the deal would be bad news also for Robert
Benmosche, the head of bailed-out insurance giant AIG, which is
operating with $132 billion in government support and is under
pressure to return the money to taxpayers.

The new price negotiations come amid fears the deal, to be
funded in part by a record $21 billion rights issue, could fall
short of the required 75 percent approval in a June 7
shareholder vote.

“The only way that the Pru is going to get a yes vote at the
(meeting) is if they manage to get a price cut. In its current
form I am almost certain the vote will fail,” one Prudential
shareholder told Reuters, requesting anonymity.

A $5 billion price cut “would certainly get more people on
side. We would certainly revisit our view,” the investor said.


TAKE A LOOK on Prudential/AIA on: [ID:nLDE64G0HM]

Reuters Breakingviews column on: [ID:nLDE64R0RK]



Olivetree Securities strategist James Chappell estimated
that cutting the price to below $31 billion would give the deal
a greater than 50 percent chance of going ahead, compared with
about 20 percent now.

“Prudential will still need to rebuild relationships with
investors and reassure that they can execute on the
acquisition,” he said.

A large majority of 72 percent said Prudential was paying
too much in a Reuters poll of 23 shareholders and analysts on
Thursday, while half of the shareholders polled said they
expected the company to lose the June 7 ballot. [ID:nLDE64Q1RJ]

On Friday, fund managers F&C asset management and Cavendish
asset management both said they would vote against the deal.
[ID:nWLA5176] [ID:nWLA5174]

A no vote would mark an almost unprecedented rejection of a
major company’s M&A plans by its shareholders, and cast doubt
over Thiam’s future as Prudential’s boss.

He has championed the AIA deal, the insurance sector’s
biggest ever takeover, 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.

Talk among traders the takeover was cancelled propelled both
Prudentials’ shares and the pound sterling higher on Thursday,
though they later steadied when the company said the deal was on

Earlier this week, voting adviser RiskMetrics told
investors to vote against the deal while the influential
Association of British Insurers issued its own warning, telling
investors to consider their options carefully.

A glimmer of hope is that AIG, which originally planned to
offload AIA in an initial public offering, may be willing to
accept a lower price because weak equity markets have now made a
flotation less attractive.

“While we have no feel for AIG’s position, we suspect that
the IPO valuation of AIA was below $30 billion,” Panmure Gordon
analyst Barrie Cornes wrote in a note.

“Given that the markets have moved south and IPOs have been
pulled, we suspect that AIG may well look pragmatically on the
renegotiation of the price.”

Prudential’s London-listed shares were down 0.7 percent at
543.5 pence by 1340 GMT, having risen almost 7 percent on
Thursday on market speculation the AIA deal was off.

Investment Tools

(Additional reporting by Jimmy Tsim, Vikram Subhedar; Writing
by Douwe Miedema, Editing by Lincoln Feast and Mike Nesbit)

UPDATE 6-UK’s Pru wants to pay less to save AIA deal