AIG rejects lower bid for Asian unit, putting deal in jeopardy

LONDON —  American International Group Inc. said Tuesday that it wouldn’t accept a lowered offer of $30.38 billion for its Asian operations, leaving its deal with British life insurer Prudential on the verge of collapse.

In a brief statement, AIG said it would stick to the original terms of the deal, under which Prudential agreed to pay around $35.5 billion.

Prudential said it was “considering its position” after failing to negotiate a better price over the weekend.

The British group had tried to renegotiate the deal in the face of growing opposition from shareholders, who are concerned about both the price and the risks involved in trying to merge the businesses.

Recent media reports indicated that around 20% of Prudential’s shareholders were prepared to vote against the takeover.

Prudential said Tuesday that its revised offer had included $23 billion in cash, around 2.16 billion of new shares and $2 billion of bonds.

“The markets clearly believe the deal that would have seen Prudential make its largest-ever acquisition and that would be accompanied by a record-breaking rights issue is dead in the water,” said Howard Wheeldon, senior strategist at BGC Partners in London.

He added that if the deal does collapse, it could also lead to the departure of Prudential Chief Executive Tidjane Thiam, who has effectively staked his career on pushing through the massive acquisition.

Thiam has been criticized for his handling of the deal, including his decision — later reversed — to join the board of French bank Societe Generale in a move that would have given him less time to focus on integrating the AIG business.

Neither firm gave any details of the talks, but with an alternative bidder seen as unlikely, the breakdown indicates that the U.S. government, which owns 80% of AIG, may be willing to revive an alternative plan of listing the Asian operations through an initial public offering in Hong Kong.

Under the original agreement, Prudential, which is not associated with the U.S. firm of the same name, must pay a termination fee of $222 million if the board changes its recommendation of the deal or if shareholders fail to approve it.

Kennedy writes for MarketWatch.com/McClatchy.