May 27, 2010
Continuing Problems with Prudential’s Plans to Purchase AIG’s Asian Assets
Back in March, Prudential announced a $35.5 billion purchase of American International Assurance, the Asian arm of A.I.G. (for more info see this prior post). The deal hit some snags early on because of regulator concern about Prudential's capital. Prudential is also encountering serious resistance from investors as it tries to complete a $21 billion rights offering in order to finance the deal. The offering requires a shareholder vote (a whopping 75% of the shares that are voted) and the Prudential shareholder meeting is scheduled for June 7th. The economist magazine has come out in favor of the deal, seeing it as more about "uniting competitors in Hong Kong and Singapore, which comprise about half of the activities in Asia of both AIA and Prudential" than about destiny and empire building. But now RiskMetrics has now entered the fray and recommended a vote against the deal. The concern is that Prudential may be overpaying for this deal, and that post-acquisition many of AIA’s people may leave to join the company’s rivals.
Prudential's management has not done an amazing job selling this rather expensive deal to their shareholders. Will this be another big deal that goes bust?
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