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Prudential calls off AIG acquisition

There is intense speculation this evening that UK insurer Prudential has failed to agree a reduced price for the acquisition of AIG's Asian operation. As a consequence the $35 billion acquisition looks set to fall by the wayside although we await official confirmation that the deal is dead. It is believed that the cancellation of the takeover will still cost the Prudential in excess of £100 million in advisers fees. There is no doubt that the proposed acquisition has exposed many of the shortfalls in the Prudential management team and in some cases been ill-advised.

If the acquisition, as expected, is abandoned tomorrow then it is likely that the future of both the Prudential management and the Prudential group itself will come under intense scrutiny. There had already been speculation about a potential takeover of Prudential by cash-rich competitors and the debacle of the AIG acquisition will intensify this speculation.

While in many ways the proposed acquisition has become the victim of volatile European and worldwide stock markets there are some who believe the proposed price was way in excess of fair value at the time. Once the Prudential management realised shareholders were not willing to back the acquisition, at least at the proposed price, it appears they left it too late to renegotiate and AIG appears to have other alternatives in the pipeline.

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