The Work

May 28, 2010 2:14 PM

The AIG/Prudential Deal: Still Going

Posted by Zach Lowe

Our Memorial Day weekend will involve the usual--barbecues, visiting family, enjoying the weather. We suspect that John Vasily of Debevoise & Plimpton and William Underhill of Slaughter and May will likely have a less leisurely three days, as they work to salvage AIG's $35.5 billion sale of its Asian life insurance unit to the U.K. insurer Prudential PLC. 

The two sides announced they had agreed on the deal nearly three months ago. The transaction, the largest of AIG's several recent divestitures, was to send $16 billion immediately to the U.S. government and provide for more than $100 million in fees to the banks who advised on it, according to our prior reporting and this story today in The Wall Street Journal. Everyone seemed happy. 

The happiness did not last. At least 15 to 20 percent of Prudential shareholders have indicated they will vote against the deal, saying the $35.5 billion price tag is too high, according to the AP. British regulators have raised questions about whether the deal will leave Prudential's capital reserves too low. And just about everyone seems stunned by Prudential's plan for a $21 billion rights offering to finance the deal--one of the largest rights offerings of any kind on record, according to Bloomberg and the AP. 

With all the questions swirling, the two sides are back at the table, and the same lawyers who handled the original deal are working on the renegotiations, according to one attorney working on the matter now. That means Debevoise for AIG, Slaughter for Prudential (with help from Cleary Gottlieb Steen & Hamilton as Prudential's U.S. counsel) and Davis Polk & Wardwell for the Federal Reserve Bank of New York. Prudential might try and negotiate the price down to $30 billion--or lower, the AP reports. 

Lawyers on the matter declined to comment or did not respond to requests for comment. But they've apparently made progress, according to a breaking story from Bloomberg, which reports that the Treasury Department and the Fed have given AIG their blessing to lower the price from the original $35.5 billion number. That probably gets the two sides a step closer to finishing the job, if not close enough to enjoy a barbecue on Saturday. 

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