UPDATE 8-UK’s Prudential 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

* AIG shares close down 3 percent in New York

(Adds U.S. Treasury statement, also adds source comment on
AIG reaction to $30 bln price and stock price)

By Myles Neligan and Cecilia Valente

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

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

AIG feels $30 billion for AIA is too low and is not in a
rush to do a deal, another source familiar with the matter said
late on Friday.

AIG believes it has many options for AIA, as it views AIA
as a “valuable property” and does not want to sacrifice value,
the source said.

An AIG spokesman was not immediately available for comment.

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

Reuters Breakingviews column on: [ID:nLDE64R0RK]

Options such as an IPO for AIA may not be so attractive in
the current volatile equity market. The insurance giant could,
however, try to find other partners for a deal.

But the U.S. Treasury Department, which bailed out American
International Group Inc in 2008, said it has considered only a
$35.5 billion deal to divest the insurer’s main Asian unit to
Prudential, Bloomberg reported.

The clock is ticking for Prudential, which faces a
shareholder vote on the deal in little over a week, meaning
negotiations are likely to intensify in the coming days.


The future of Prudential Chief Executive Tidjane Thiam
hinges on the success of his 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.

“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 also be bad news for Robert
Benmosche, the head of 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.

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.

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 closed down 1.1 percent
at 541.5 pence. Shares of AIG closed down 3 percent at $35.38
on the New York Stock Exchange.

Investing Analysis

(Additional reporting by Ilaina Jonas, Megan Davies, Paritosh
Bansal, Jimmy Tsim, Vikram Subhedar; Writing by Douwe Miedema,
Editing by Lincoln Feast, Mike Nesbit, Matthew Lewis and Carol

UPDATE 8-UK’s Prudential wants to pay less to save AIA deal