HONG KONG - Prudential Plc halted trading in its Hong Kong listed shares on Friday as the British insurer sought to cut the $35.5 billion (S$49.9 billion) price tag it originally negotiated for AIG Inc's main Asian assets.
Prudential is trying to lower the price of the planned deal to purchase American International Assurance (AIA) amid rising pressure from investors, a source familiar with the situation said on Thursday.
Prudential in Hong Kong declined to comment on the reason for the suspension in trading, but the company was likely to issue a clarification statement to the HK exchange in the due course, one source told Reuters.
Any change to the price should reflect integration risks that Prudential will face, said Patricia Cheng, an analyst with CLSA.
"Prudential's target, to triple AIA's new business value by 2013, looks too aggressive," she said. "The price can't be based on this target. But the price can't get much lower either. Investors have an idea of these integration risks and I don't think they are likely to agree to the deal."
Prudential agreed in March to buy AIA -- the insurance sector's biggest deal ever -- helping the bailed-out American International Group repay a large part of the debt it owes to taxpayers.
"Technically, the price can be negotiated up or down, but the question is whether there is the will to do so," said one person with knowledge of the matter, asking not to be identified as the discussions were confidential.
The company hopes to get the price tag for AIA down to as low as $30 billion, the Financial Times reported, citing people familiar with the situation.
Bernstein Research analyst Toby Langley said a $5 billion reduction in the price would make the deal earnings neutral to Prudential by 2013/14.
"A cut of $3.5 billion would see earnings dilution of 5 percent in 2013 with neutrality in 2015," he said in a note.
Prudential's London listed shares rose almost 7 percent on Thursday on market talk it may call off the deal or fail to get the required 75 percent shareholder approval to get it done.
Prudential's bold and ambitious move to transform itself into the dominant Asian insurer will be put to shareholders vote on June 7. Ahead of that, an influential voting adviser, RiskMetrics, has told investors to vote against the deal.
AIG's majority owner, the U.S. Treasury, has maintained that a viable option is to return to an initial public offering plan is was pursuing before Prudential's bid.
AIG had quashed that plan in favor of the Prudential deal, but there was serious misgivings about the deal among AIA staff and CEO Mark Wilson had threatened to quit if the deal had progressed, FT reported earlier this week.