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Prudential abandons AIA deal

Prudential has confirmed that it will not complete the $35.5bn deal

02 June 2010

Prudential has abandoned plans to takeover AIA after the UK insurer failed to negotiate a cut-price deal.

In March, Prudential agreed to buy Asian insurer AIA, a branch of AIG, for $35.5 billion (£25 billion) but was forced to try and reduce the price following shareholder opposition.

Many investors felt the deal was too expensive and planned to vote against the proposed move in a ballot held in June.

AIA refused to accept a reduced $30 billion offer, claiming that it would not consider any change in the terms of the deal.

Prudential chairman Harvey McGrath said: "We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG.

"Unfortunately, it has not been possible to reach agreement... we are therefore withdrawing from the transaction."

The firm stands to lose around £450 million in costs relating to the deal, including a penalty charge of £152 million for breaking the agreement.

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