In March, it was reported reported that American International Group Inc. (AIG) would sell AIA Group Ltd., to Prudential plc for approximately $35.5 billion, including about $25 billion in cash, $8.5 billion in face value of equity and equity-linked securities and $2 billion in face value of preferred stock of Prudential, subject to closing adjustments.
Now, AIG and Prudential are in talks to revise the composition of the deal—cutting the $25 billion cash component of the deal by $2 billion—according to numerous news outlets. Citing “people familiar with the matter,” the Wall Street Journal, reports that Prudential last week delayed the launch of a $20 billion rights offering after the U.K.'s Financial Services Authority raised concerns about its capital position.
The transaction includes all of the companies of the AIA Group operating in 15 geographical markets across Asia Pacific, including the company's international network of more than 320,000 agents and approximately 23,500 employees serving the holders of more than 23 million in-force policies and the more than 10 million participating members of its clients for group life, medical, credit life coverage and pension products.
The cash portion of the proceeds from the sale will be used to redeem preferred interests with a liquidation preference of approximately $16 billion held by the Federal Reserve Bank of New York in the special purpose vehicle formed to hold the interests in AIA, and to repay approximately $9 billion under the FRBNY Credit Facility, according to AIG.
AIG intends to monetize the $10.5 billion in face value of Prudential securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods. All net cash proceeds from the monetization of these securities will be used to repay any outstanding debt under the FRBNY Credit Facility.
During the first quarter 2010, AIG also announced its plan to sell Alico to MetLife Inc. The insurer also sold an asset management unit to make the period its busiest for divestitures since beginning to restructure in 2008. Despite the fact Prudential said last week that it would delay a rights offering to finance its acquisition, Bemosche said he expects to close all three deals by the end of the year. “The transactions are on track,” he said.