The Prudential is in talks with American international Group to restructure its $35.5bn (£24bn) deal for AIG's Asian life insurance unit. The negotiations are understood to be centred on funding behind the deal, include cutting back the $25bn cash component, rather than altering the overall price. AIG may agree to reduce the cash component by $2bn and instead subscribe to a Pru loan or hybrid securities of that amount.
The Prudential's audacious deal to buy American International Assurance (AIA) hit a last-minute snag last week when the Financial Services Authority (FSA) blocked its plans to publish details of a $21bn cash call to finance the purchase. It also faced growing pressure from shareholders, whose concerns about the deal increased after the delay.
The Prudential needs three-quarters its investors to approve the takeover, which is the most audacious in financial services since the credit crisis. One of the Prudential's leading investors said he understood it was negotiating with AIG about a lower price, which would ease shareholders' concerns about a £1bn loan facility which Pru has agreed to appease solvency worries raised by the FSA. But sources close to the deal said the talks between AIG and Prudential were "more about structure than about price".
The sides are now working to get a deal done this week, although there is no certainty that will happen. The Prudential's talks with AIG are part of wider negotiations with the FSA. However, the AIG chief executive Robert Benmosche told employees on Monday that he was confident the sale would move forward.
Prudential and the FSA had found common ground in talks over the weekend, but further steps were needed to salvage the takeover. The Pru is facing an uphill struggle to restore some credibility for its chief executive Tidjane Thiam, as it seeks the approval of cautious regulators against a background of jittery world markets and increasingly mutinous shareholders.
AIG and Prudential declined to comment last night.