AIG said to have U.S. approval to reduce price of Asian unit in sale to Prudential

The Treasury Department and Federal Reserve, which bailed out American International Group Inc. in 2008, are willing to allow the insurer to lower the price it would accept in the sale of its main Asian unit to London-based Prudential, said two people with knowledge of the situation.

Prudential said Friday that it had asked New York-based AIG to change the terms of the $35.5-billion transaction the two companies announced in March for AIA Group. AIG’s board had scheduled a meeting to discuss options after some of Prudential’s largest shareholders indicated that they wouldn’t fund the purchase, according to the people, who declined to be identified because the talks are private.

AIG’s sale of AIA, which operates in 13 markets from China to Australia, would be the biggest step to repay U.S. taxpayers for the firm’s $182.3-billion bailout. Before the March 1 announcement of the agreement, AIG had planned to divest AIA through a public offering, an option the insurer has retained.

“It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci, managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.”

AIA may be valued at slightly less than $30 billion in the event of a public offering, Graci said, according to an analysis done before the sale announcement.

Investors owning as much as 20% of Prudential’s stock plan to oppose the takeover at the annual general meeting June 7, Neptune Investment Management, a London-based shareholder, said this week. Prudential Chief Executive Tidjane Thiam needs 75% of investors to support the proposed $21-billion rights offer for the deal to succeed.