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Investors threaten to derail AIA bid

Prudential executives were last night locked in talks with insurer AIG and US government officials in a desperate bid to secure a cut in the $35.5bn (£24.5bn) price of Asian insurer AIA by the opening of trading in London tomorrow.

The insurer has been told that it needs to secure a cut of at least 10% in the price by key fund managers at Capital Investments, the US institution that is its biggest shareholder. With just over 13% of the stock, Capital has the power to all but kill off the deal by withholding support, given the degree of opposition already voiced by UK-based investors.

Prudential needs the support of 75% of its shareholders for the takeover of AIA to go through. The company's chief executive, Tidjane Thiam, is due in London this morning for two days of intensive talks with powerful UK institutions.

Relations between Prudential and some of its leading shareholders remain tense, and failure to attend those meetings by Mr Thiam could exacerbate an already fraught situation. Mr Thiam needs to be on hand to secure their support.

Several dissidents have indicated that they will not back the deal with even a 10% reduction in the price, which would take the total consideration to just under $32bn.

However, analysts at Alliance Bernstein have estimated the "fair" value of AIA's business to be $49bn, saying that any reduction in the price would "clearly benefit Prudential shareholders further".

Critics have argued that the best option for Prudential would be to walk away from the deal and try to mend fences with its investors, who have been sharply critical over the way the company has communicated a deal that would transform it into the biggest foreign insurer in Asia.