Shares in Prudential have been suspended this morning as the insurance firm tries to finalise the acquisition of AIG's Asian operations.
We had expected a deal to be announced before the start of trading. Sources indicated last night that Prudential had agreed to pay roughly $25bn in cash plus $10bn or so in equity for AIA. The deal would transform the company, meaning that most of its revenue and profits would come from Asia.
However, the deal is not without its complications. Prudential would need to raise at least $20bn from its own shareholders through a rights issue – nearly as much as its current market capitalisation of £15bn ($23bn).
Even if City investors do support such a large cash call, the US government – which bailed out AIG during the heights of the financial panic – also need to give its approval.
Shortly before trading began in London, Prudential released a statement confirming that talks with AIG are still going on:
As part of Prudential's continued focus on its Asian growth strategy, the business continually reviews opportunities for expansion. AIA represents a unique and strategically compelling opportunity for Prudential and AIA to create the leading insurer in South East Asia.
There can be no certainty that these discussions will lead to any agreement or as to the terms or timing of any such agreement. The Company confirms that it is not currently contemplating the implementation of such a combination through a structure that would be classified as a reverse takeover under the Listing Rules of the UK Listing Authority and intends that any combination, if agreed, would be effected through a new holding company.
We'll bring you more news on this deal throughout the day.
