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AIG, American General Close to Deal

May 11, 2001

NEW YORK (AP) _ American International Group is reportedly close to finalizing its multibillion-dollar acquisition of fellow insurance company American General Corp.

Both The New York Times and The Wall Street Journal reported on their Web sites Thursday that the two companies could announce a completed deal as early as Friday. The Times reported that the deal would be worth $23 billion; the Journal valued it at $24.6 billion.

New York-based AIG made the unsolicited offer for American General in early April, nearly a month after Britain’s Prudential PLC made an all-stock offer of $26.5 billion to purchase the Houston-based American General.

In reaction, investors sent the British insurer’s shares plummeting, reducing the deal’s value to as low as $20.6 billion, thus opening the door for an AIG bid.

Prudential’s offer is currently worth about $23.5 billion, or $44 per share, while AIG’s offer is worth about $46 per share.

The Journal reported that American General has been holding discussions to terminate its agreement with Prudential. If American General calls off its agreement with Prudential, it must pay a $600 million exit fee.

AIG president and chief executive Maurice ``Hank″ Greenberg has said that the penalty is built into his company’s offer.

Prudential PLC is not related to Newark, N.J.-based Prudential Financial Corp.

In trading Thursday on the New York Stock Exchange, shares of AIG were down 86 cents to $83. Shares of American General were up 2 cents to close at $44.62, while in London, shares of Prudential PLC rose 18.5 pence to 846 pence ($1.19).

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On the Net:

http://www.aig.com

http://www.agc.com

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