AIG Offers $23 Billion for American General

American International Group Inc., the world’s largest insurer by market value, said Tuesday that it has offered to buy U.S. life insurer and annuity giant American General Corp. for about $23 billion, topping the deal agreed to last month with British life insurer Prudential.

AIG said it would pay $46 per American General share in the proposed all-stock deal, based on Tuesday’s closing market price of AIG common stock. That values the deal at $23.1 billion.

That is well above Prudential’s offer, which was worth $39.76 per share, or $20 billion, based on Tuesday’s closing prices.

Prudential’s offer was worth $26.5 billion when the deal was announced March 12, but has slid with its share price as investors fretted over the deal.

“It appears clear that the exceptionally steep price drop experienced by Prudential’s stock reflects investors’ serious concerns with the transaction,” wrote AIG Chairman Maurice Greenberg in a letter to American General Chief Executive Robert Devlin, which was made public by AIG on Tuesday.

Greenberg said in a statement

that AIG believed “the combination of our two companies is uniquely attractive, in terms of mix of business and distribution channels.”

New York-based AIG, which also controls SunAmerica Inc. and 21st Century Insurance in Los Angeles, said it would offer 0.5462 to 0.6037 of its shares for each share of American General based on where its stock closes during an agreed-upon period before the closing date.

Prudential spokeswoman Geraldine Davies said: “We note that our merger agreement with American General remains in full force and effect.”

American General shares fell 13 cents to close at $36.80 on the New York Stock Exchange before AIG’s offer was announced, and AIG fell $2.74 to close at $80.21.

In after-hours trading, American General traded at $42.75 on Instinet.