Pru reopens talks over AIA move

The UK's biggest insurer is thought to be trying to cut the price it must pay for AIA to less than 30 billion US dollars (20.7 billion), compared with the current price tag of 35 billion US dollars (24.1 billion).

Shareholders have threatened to vote down the takeover on cost grounds, particularly in light of recent falls for Asian stock markets. It needs the support of 75% of investors at a special meeting on June 7.

The Pru said discussions were taking place with AIG about the "current status" of the transaction but declined to give further details.

"These discussions may or may not lead to change in the terms of the combination of AIA Group and Prudential," it added.

The US government owns 80% of AIG and is thought to be determined to get the failed insurance giant off its books. The Daily Telegraph reported today that the renegotiations followed a "strong suggestion" from the office of Tim Geithner, the US Treasury secretary.

The takeover would give Pru around 30 million customers in Asia and see the Asian operation become by far the group's biggest division - contributing around 60% of new business profit.

The insurer has suffered a series of setbacks since it unveiled plans to buy the business from the American insurer in March. It was forced to delay a 14 billion investor cash-call being used to finance the takeover after the Financial Services Authority raised concerns about the capital strength of the enlarged company.

The rights issue was eventually launched in mid-May, but the hiccup with the FSA compounded worries over the acquisition.

As well as their worries about the price tag, shareholders have expressed doubts about the merits of the deal and the length of time it will take to secure acceptable returns from the investment.

Robin Geffen of Neptune Investment Management has been at the forefront of a campaign urging shareholders to vote against the proposal.

He said yesterday: "The deal does not give access to India and the position in China would result in a company that is not of a scale where it could hope to compete with local giants like China Life and Ping-An.

"The AIA is very big in Hong Kong and Singapore but these are mature markets where growth levels remain modest at best. Elsewhere, AIA has a large market share in Thailand, which brings some serious local issues into focus.

"It would appear also that the Prudential's own sales force in Asia is more productive than the AIA sales force it is seeking to buy at a considerable premium."

Mr Geffen added that British companies have an "extremely poor record" of making transformational deals overseas.

The Prudential said yesterday: "We believe the acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long-term returns to our shareholders."