Prudential taps Temasek to help fund AIA acquisition

March 4, 2010
Singapore Democrats

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P.R. Venkat
Dow Jones Newswires

Prudential PLC is in talks with Singapore state-investment company Temasek Holdings Pte. to possibly support a share offering the U.K. insurer is planning so it can finance its acquisition of American Insurance Group’s (AIG) Asian operations, two people familiar with the situation said Wednesday.

“Talks are at a very preliminary stage and nothing has been decided,” one person said.

Prudential on Monday agreed to buy American International Assurance Ltd., the Asian life unit of US insurer AIG, for US$35.5 billion. The deal would be the largest insurance takeover on record, according to Thomson Reuters.

Prudential plans to pay for the cash component of the deal to buy AIA with a $20 billion rights issue and by issuing $5 billion in new debt.

Prudential has also tapped other sovereign wealth funds in Singapore and China to help it finance the massive deal, the Financial Times reported earlier this week.

Government of Singapore Investment Corp., which already holds a 0.5% stake in Prudential, declined to comment.

Separately, three other people familiar with the situation said that Prudential has also approached Asian banks including Singapore’s DBS Group Holdings Ltd. to underwrite the share issue along with Credit Suisse, JP Morgan Cazenove and HSBC Holdings PLC.

One person said that even though it’s not a shareholder, Temasek could subscribe to Prudential’s rights issue if it wanted.

“The underwriters can create a pool of shares and Temasek can subscribe to it,” one person said.

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