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Prudential readies Rights Issue aiming to Complete AIA Acquisition

Posted on May 18, 2010 by Sergio Ulloa ()  | Tags: AIA, Prudential, Singapore

After having received the tacit approval of the Financial Services Authority in the UK, Prudential has now released details of the controversial US$21 billion (EUR 17 billion) rights issue offering 13.96 billion new shares to help funding the US$35.5 billion (EUR 28.8 billion) purchase of American International Assurance Group Ltd. (AIA) from American International Group (AIG). With the deal going through, Prudential once again raises hopes that AIG would be able to pay the US Government a good trench of the US$182.3 billion (EUR 147.9 billion) bailout it received during the height of the financial tsunami. Prudential stands to gain access to an additional 20 million customers and 23,500 employees deployed in 15 countries, increasing dramatically the foothold of the insurer in Asia. According to details contained in the prospectus, Prudential will pay AIG US$25 billion (EUR 20.3 billion) in cash, US$5.5 billion (EUR 4.46 billion) as an equity stake representing 10.9 percent of the combined entity, a US$3 billion (EUR 2.43 billion) mandatory convertible bond, US$2 billion (EUR 1.62 billion) in Tier 1 notes and any subordinated notes that AIG subscribes to, scraping the standby commitment from AIG to the subscription of hybrid capital to the tune of US$1.875 billion (EUR 1.52 billion), required in a previous announcement released at the beginning of March this year. A minimum of 75 percent of shareholders need to approve the AIA deal and rights issue on the Extraordinary General Meeting scheduled by Prudential to occur on 07 June. Prudential plans to go ahead with the rights issue in London on 08 June, 09 June in Singapore and 10 June in Hong Kong. Given the opposition expressed by key shareholders in previous occasions, it remains to be seen whether this most ambitious acquisition works out for all parties involved. Insurance Companies mentioned: Prudential Prudential plc LogoPrudential 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. AIG AIG LogoThe American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally. AIA AIA LogoAIA 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.
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