American International Group Inc. and Prudential P.L.C. have announced the formal termination of the AIA Group Ltd. purchase agreement.
Prudential, London (NYSE:PUK), announced Wednesday that it had withdrawn a $35.5 billion offer for AIA, a giant Asian life insurance unit of AIG, New York (NYSE).
Rating agencies, securities analysts had questioned the price of the deal, and Prudential tried unsuccessfully to reduce the total price to $30.4 billion, and to reduce the amount of cash to be paid to $23 billion, from $25 billion.
The original purchase agreement called for Prudential to pay AIG a 153 million pound breakup fee if it walked away from the deal. The breakup fee would have a value of about $230 million at current exchange rates.
In some cases, parties that break off deal talks try to avoid paying breakup fees.
In this case, Prudential and AIG have entered into a termination agreement that states that AIG will receive a 153 million pound breakup fee July 1, AIG says in a report filed today with the U.S. Securities and Exchange Commission.
“All rights and obligations under the share purchase agreement are terminated, except that confidentiality agreements among the parties and certain procedural provisions of the share purchase agreement remain in effect,” AIG says.