London: British insurer Prudential said Wednesday it was withdrawing from a bid to buy AIA, the Asian arm of AIG, after the US group refused to lower its asking price.
Prudential said in a statement it was “in negotiations with American International Group, Inc. (AIG) for the termination of the agreement (the SPA) for the combination of Prudential with AIA Group Limited.”
The deal had foundered after AIG turned down Prudential’s request to cut the price tag of $35.5 billion (€29 billion) to nearer $30 billion, following a revolt by the British company’s shareholders.
Prudential chairman Harvey McGrath said: “Unfortunately, it has not been possible to reach agreement so we feel it is in the best interest of our shareholders not to pursue this opportunity.
“We are therefore withdrawing from the transaction.”
The takeover would have been the biggest ever in the insurance sector, transforming Prudential into the world’s top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.
In its statement, Prudential said it would pay AIG a break fee of more than 152 million pounds (224 million dollars, 183 million euros), plus legal fees of 81 million pounds.
The collapse of the deal will place enormous pressure on Prudential’s chief executive Tidjane Thiam, who aimed to transform the 162-year-old British company into an international insurance powerhouse.
Thiam, born in the Ivory Coast, but with French nationality, took a huge gamble by making the ambitious bid for AIA only six months into his job at the helm of Prudential.
In the statement, Thiam said Prudential would maintain a strong focus on growing its business in Asia.
The firm had entered into the potential deal “from a position of strength in Asia and we view the region as offering excellent growth opportunities for Prudential,” he said.
But the Financial Times said on Wednesday that some investors were calling for Thiam’s head after his failure to renegotiate the deal.
“It will be an early agenda item -- who will be the new CEO,” one major unnamed investor told the paper.
The Daily Telegraph reported that AIG had turned its back on Prudential and was instead pursuing other options.
Quoting sources, the paper said AIG was exploring talks with sovereign wealth funds, including Singapore-controlled GIC and Temasek, and Qatar Holdings, which could become “cornerstone investors” in AIA ahead of reviving plans for an initial public offering in Hong Kong.
The Telegraph said the implosion of the deal had made Prudential a bid target itself.
AIG said on Tuesday it would not agree to Prudential’s request to reduce the asking price.
In a terse statement, it said that “after careful consideration, the company will adhere to the original terms of its previously announced agreement.
“The company will not consider revisions to those terms,” it added.
Prudential had agreed in March to the original 35.5-billion-dollar takeover price for AIA but then scrambled to get a reduction as some shareholders, such as asset manager F&C, baulked at the cost.
Prudential’s newly listed shares in Hong Kong and Singapore fell Wednesday.
Investors marked down the insurer’s Hong Kong share price by 0.47 percent to 63.20 Hong Kong dollars (8.10 US dollars), while the stock was down 10 cents, or 1.20 percent, to 8.22 US dollars in Singapore.
Wooing investors, Prudential last week took out secondary listings in Hong Kong and Singapore ahead of a 21-billion-US-dollar rights issue to help fund the deal.
Despite the share price falls, one Hong Kong-based analyst suggested there might well be relief that the deal had fallen through.
“AIA is three times bigger than Prudential -- it’s too big for Prudential to swallow,” Fulbright Securities general manager Francis Lun told AFP.