HONG KONG – Prudential, Britain’s biggest insurer, agreed on Monday to buy an Asian life insurance unit from American International Group for $35.5 billion in cash and stock to gain more than 20 million customers in the region.

Prudential will pay $25 billion in cash and $10.5 billion in stock and other securities for AIA Group, the London-based insurer said in a statement Monday.

The insurer said it plans to raise $20 billion in a rights offering and sell about $5 billion of bonds to finance the cash part of its offer.

The purchase is CEO Tidjane Thiam’s first since he took over five months ago, and is the biggest announced by any company worldwide this year, according to data compiled by Bloomberg. Prudential is trying to boost sales in Asia as growth in Britain declines.

By acquiring AIA, Thiam gets a business with more than 90 years in Asia and more than $60 billion of assets in 13 markets in the region. The price is about 50 percent greater than Prudential’s market value.

“It shows the company is very bullish on the Asia market,” said Luo Yi, a Shenzhen-based analyst at China Merchants Securities Co. “The Chinese market has vast potential.”

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The sale would be AIG’s largest since it received a U.S. government bailout in 2008. AIG had planned an initial public offering for the Hong Kong-based unit to help repay its $182.3 billion rescue. AIG will own about 11 percent of Prudential following the transaction, Thiam told reporters Monday.

“We decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayer,” AIG CEO Robert Benmosche said in a statement Monday.

The acquisition of AIA, founded in Shanghai in 1919, gives Prudential a business with 20,000 employees and 250,000 agents in markets spanning China to Australia. AIA sells life, accident and health insurance policies, and private retirement planning and wealth management services, its Web site shows. McKinsey & Co. has estimated Asia will deliver around 40 percent of global life insurance premium growth over the next five years.

“Strategically it’s probably the right move” for Prudential, said Justin Urquhart Stewart, who oversees about $3.3 billion at 7 Investment Management in London, including Prudential shares. “It puts them into a different league.”

The insurer plans to list its shares on both the Hong Kong Stock Exchange and the London Stock Exchange following the transaction. It will keep its headquarters in London.

Thiam said in a Feb. 17 interview that he wants to raise the proportion of sales from Asia to 80 percent by 2015 from 50 percent now. Prudential and AIA combined would have had about 60 percent of new business profit from Asia in 2009, he said Monday.

“It puts us in a strong leadership position in all the critical growth markets in the region,” Thiam said in a statement.

 


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