DealZone

AIG won’t haggle?!

June 1, 2010

With an outstanding IOU to Uncle Sam of more than $50 billion, AIG hardly seems to be in a position to turn up its nose at a lower bid for AIA from Britain’s Prudential. The message was pretty clear to Pru’s CEO Tidjane Thiam that his shareholders were in little mood to approve a $21 billion rights issue to fund a $35 billion purchase of AIG’s Asian assets. So he came back with a $30 billion offer. No surprises there. He’d be mad not to haggle, particularly given it looks like Pru is the only buyer out there.

Suggestions that AIG would opt for an IPO of the Asian business shouldn’t have been much of a threat to Pru’s bid. Expectations were that AIG would get around half what Pru was offering – after haggling – if it went to market, and that assumed a market with a whole lot more appetite for new issues than the one AIG is now looking at.

So what gives? Does AIG have some mystery buyer waiting in the wings willing to hit its magic price tag? Or has AIG CEO Robert Benmosche been given some secret blessing by the U.S. Treasury to slow down the asset sales and try to rebuild the business? That’s almost harder to believe than the white knight suggestion. This is an election year, and politicians will smell blood if it starts to look like AIG is dragging its heels in paying its bills.

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