Prudential taps Asian sovereign funds to finance AIA deal

SINGAPORE: British insurer Prudential is tapping sovereign wealth funds from China and Singapore to help finance its $35.5 billion buyout of AIA, the Asian arm of US insurance giant AIG, a report said on Tuesday.

The Financial Times quoted unidentified sources as saying that Prudential and its advisers were in talks with the sovereign wealth funds to support a planned $20 billion share offer.

It said the Singaporean and Chinese sovereign wealth funds had not made a final decision but their response was positive.

Prudential on Monday agreed to buy AIA for $35.5 billion in the insurance sector's biggest ever takeover.

The acquisition of AIA will transform Prudential into the world's top non-Chinese insurer by market capitalisation, ahead of major competitors Allianz and AXA.

Under the acquisition terms, the British insurer will pay AIG $25 billion in cash and the remaining $10.5 billion in new Prudential shares and other securities.

The Financial Times said Prudential is planning a rights issue of $20 billion, giving existing shareholders in the British insurer the right to buy the shares first.

Should the shareholders decide not to take up the offer, the sovereign wealth funds will then invest in the shares offering, it said.

Prudential's group chief executive Tidjane Thiam said that Asia is the "most attractive opportunity in our industry today," partly because of the region's strong savings habits.

"Asia is the engine of the group's future growth, particularly the fast growing economies in Southeast Asia," he said.

"Asia is complex, dynamic and exciting, and its economies differ significantly, with varying levels of economic development, from the OECD members, Japan and Korea, to the fast growing markets of Southeast Asia, such as Indonesia and Malaysia."

Sales in Asia already make up half of new contracts for Prudential across a number of countries including China, India, Indonesia, Malaysia and Thailand. The company also has a strong presence in Britain and the United States.