Posted on May 14, 2010 by Sergio Ulloa
The Financial Services Authority (FSA) of the UK have given their approval in principle for Prudential to go ahead with the US$35.5 billion
(EUR 28.3 billion) deal made with American International Group (AIG) to purchase American International Assurance (AIA), according to sources familiar with the latest situation on this most audacious deal since the financial tsunami started to be felt globally.
Prudential is now likely to move swiftly in pricing the planned massive rights issue within days.
The FSA had last week blocked the deal at the eleventh hour on concerns over the capital base of Prudential, creating a delay in the original schedule to buy AIA. The cash component of the deal has been lowered to US$23 billion (EUR 18.3 billion) from the originally agreed amount of US$25 billion (EUR 20 billion), retaining the overall price of the deal. It is now up to the Listing Authority of the UK to approve the US$21 billion (EUR 16.8 billion) rights issue, opening the potential for further delays.
AIG wishes for the best terms possible for the cash component as it would allow the insurer to repay taxpayers in the US the US$182.3 billion (EUR 145.4 billion) bailout it received from the US government.
Prudential has yet to secure approval of the takeover deal by at least 75 percent of investors, with shareholders increasing the pressure to offload the UK operations
instead of going ahead with the rights issue.
All parties concerned wish for the best outcome and least delays possible and the stakes couldn't be higher at the moment.
Insurance Companies mentioned:
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including; Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.