British insurance giant Prudential ditched its audacious deal to buy AIG's Asian unit AIA yesterday, ending a bid to become the world's top non-Chinese insurer, after AIG refused to cut the price.
The failed takeover, worth $35.5 billion (€29 billion) was masterminded by Prudential's high-profile chief executive Tidjane Thiam, whose glittering career now looks tarnished, according to media.
"Prudential plc announces that it is in negotiations with American International Group, Inc for the termination of the agreement for the combination of Prudential with AIA," the London-based firm said in a statement.
The deal collapsed one day after AIG rejected a request by Prudential to cut the price to $30 billion, following a shareholder revolt over the high cost.
Prudential had unveiled the record takeover in March, declaring it a transformational deal which would make it the world's top non-Chinese insurer by market capitalisation, ahead of competitors Allianz and AXA.
The mega-deal would have been the biggest-ever takeover in the global insurance sector.
In reaction to news of the failure, Prudential's share price sank 2.61 per cent to 560.5p in early morning trading yesterday, while the FTSE 100 index on which the group is listed was down 1.16 per cent.
However, the stock had soared by 6.3 per cent on Tuesday as investors had welcomed AIG's refusal to budge on the price.
"Unfortunately, it has not been possible to reach agreement so we feel it is in the best interest of our shareholders not to pursue this opportunity," Prudential chairman Harvey McGrath said in the statement.
"We are therefore withdrawing from the transaction."
The British firm said it would now pay AIG a break fee of more than £152 million, plus legal fees of £81 million.
Prudential boss Thiam, born in the Ivory Coast, but with French nationality, took a huge gamble by making the ambitious bid for AIA only six months into his job at the helm of the British group.
Thiam, who aimed to transform the 162-year-old British company into an international insurance powerhouse, added yesterday that the deal had required renegotiation because of turbulent financial markets.
"We entered into this potential transaction from a position of strength in Asia and we view the region as offering excellent growth opportunities for Prudential," Thiam said.
"We agreed with shareholders that a renegotiation of the terms was necessary given market movements but it has not proved possible to reach agreement."
He also stressed that Prudential would keep a strong focus on expanding its business in Asia.
"Our existing business in Asia has delivered another record performance in the first quarter of this year and we will continue to focus on generating sustainable shareholder value across our portfolio," added Thiam.
But the Financial Times said yesterday some investors were calling for Thiam's head after his failure to renegotiate the deal.
"It will be an early agenda item - who will be the new CEO," one major unnamed investor told the paper.
The Daily Telegraph reported that AIG had turned its back on Prudential and was instead pursuing other options.
Quoting sources, the paper said AIG was exploring talks with sovereign wealth funds, including Singapore-controlled GIC and Temasek, and Qatar Holdings, which could become "cornerstone investors" in AIA ahead of reviving plans for an initial public offering in Hong Kong.
Thiam was appointed Prudential boss in March 2009, becoming the first black chief executive of a company listed on London's benchmark FTSE 100 index.
Thiam, who began his role in October 2009, was formerly Prudential's financial chief.