American International Group (NYSE: AIG) announced Monday it is selling AIA Group, Limited to Prudential plc for $35.5 billion in a cash and stock deal. The move is the latest in the insurer’s restructuring plan to raise cash and repay taxpayer money.
AIA Group, which is the largest pan-Asian life insurance company, will be acquired by Prudential for $25 billion in cash and $10.5 billion in equity, mostly derived of preferred stock and common shares.
Prudential plc, which is Britain’s largest insurance firm, plans to use a $20 billion rights offering and the sale of roughly $5 billion in bonds to finance the deal.
“In considering two viable, very attractive alternatives to successfully monetize AIA, including an initial public offering, we decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayers,” said AIG President and CEO Bob Benmosche in a press release.
AIG seriously considered spinning off AIA with an initial public offering in order to raise cash after early bids for the unit were far below what management believed was fair value. Prudential’s initial bid was believed to be much lower than the current deal.
“Combining Prudential, which has long been committed to enhancing its profile in Asia, and AIA, a remarkable Asian franchise, will create an unrivalled life insurance powerhouse in Asia, one of the world’s fastest growing markets,” added Benmosche.
The deal has been approved by the board of directors of both AIG and Prudential, and is expected to close by the end of 2010, subject to regulatory and shareholder approval.
