March 5, 2010 / 2:40 PM / 10 years ago

AIG-Pru deal set $231 million breakup fee

NEW YORK (Reuters) - Britain’s Prudential Plc (PRU.L), under its $35.5 billion deal for AIG’s (AIG.N) Asian life unit, has agreed to payments of as much as $104 million per month if the deal does not close by August 31 and a 153 million pound ($231 million) termination fee.

Prudential agreed to pay American International Group 5/1200, or about 0.4 percent, of the cash consideration outstanding per month from September 1, if the deal for American International Assurance (AIA) has not closed or been terminated by then, according to a U.S. Securities and Exchange Commission filing.

While announcing the deal on Monday, American International Group had said it expected the deal to close by the end of the year.

Prudential plans to pay AIG $25 billion in cash, $5.5 billion in common stock, $3 billion in mandatory convertible securities and $2 billion in preferred stock for AIA, according to the filing.

Separately, AIG, which is nearly 80 percent owned by the U.S. government, said it would sell its 13.8 percent stake in reinsurer Transatlantic Holdings Inc TRH.N, worth about $500 million at Thursday’s closing stock price.

The insurer’s American Home Assurance Co unit would sell the 9.2 million Transatlantic shares in an offering to be held by March 9.

Transatlantic shares closed at $53.76 on Thursday, off their 52-week high of $55.90. They slid 3.4 percent to close at $51.96 on Friday.

Transatlantic said it would buy up to 2 million of the shares in the offering.

AIG said it intends to reserve a portion of the offering for purchase by index funds.

The big insurance company, rescued in September 2008, has been selling off assets to pay back the government, which has committed up to $182.3 billion in taxpayer funds to the bailout.

In June it received gross proceeds of $1.1 billion, which included the underwriters exercising options to buy 3.9 million additional shares.

It is also near a deal to sell another large foreign life insurance unit to MetLife Inc (MET.N) in a $15 billion deal.

Shares of AIG closed up 5.1 percent at $28.08 on the New York Stock Exchange.

Reporting by Paritosh Bansal; editing by John Wallace, Robert MacMillan, Gary Hill

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