Friday, June 4, 2010

Prudential Calls Off Deal to Buy AIA

It has been reported that Prudential has called off the deal to buy AIA. In what was a "surprising" move after what seemed like months of headline news, Prudential seems to have bowed down to shareholder pressure and called off the US$35.5billion deal that would have made it the largest non-Chinese insurer. The decision came after AIG refused to reduce the price tag for AIA to a reported US$30billion.

Good news for consumers

This is certainly good news for consumers as with distinct AIA and Prudential brands, consumers will have a larger pool of insurance products to choose from. Not to mention that this two giants will continue to compete with one another and create better products for consumers to choose from

Bad News for Prudential

The stock price for Prudential fell after it announced the news. Prudential chairman has however stated that no heads will be rolling for the failed deal. Prudential chief executive Tidjane Thiam has come under fire for the failed deal. This can only be worsened by the fact that many shareholders were not supportive of the deal in the first place as they felt that Prudential was overpaying for AIG's Asian unit.

What Now?

It now looks certain that AIG will IPO its AIA unit in the Hong Kong Stock Exchange. GIC is reported to be interested in taking a stake in the IPO of AIA.

Meanwhile, Prudential has also listed its stocks in Singapore and Hong Kong for the purpose of raising capital for the failed acquisition. It remains to see whether the stock will remain listed in the two exchanges.

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