NEW YORK (CNNMoney.com) -- AIG and Prudential PLC formally terminated a deal for an Asian life insurance unit on Thursday that would have accelerated AIG's bailout repayment to the U.S. government.
The announcement comes two days after AIG rejected Prudential's reduced bid for AIA, AIG's Hong Kong-based life insurance division. In early March, the companies had agreed upon a $35.5 billion price tag for AIA. But it became apparent over the past few weeks that Prudential's shareholders were not going to accept the deal.
Prudential attempted to renegotiate the terms of the deal with AIG, offering $30.375 billion instead. Prudential PLC is not related to the American insurer Prudential Financial Inc.
AIG has said that it considers the sale of AIA to be a crucial component of its effort to repay the more than $130 billion it has borrowed from U.S. taxpayers. The troubled insurer had planned on using the proceeds of the sale to pay down $25 billion of its debt to the Federal Reserve.
When the deal was first announced on March 1, AIG's Chief Executive Robert Benmosche said the deal would allow AIG "to realize value on a faster track to repay U.S. taxpayers" and will give the company "greater flexibility" with its restructuring plans.
Now that the deal has fallen through, AIG may consider an initial public offering for AIA, an option that the company had initially proposed last year. An IPO would take much longer to complete than a direct sale, and the recent market turmoil may dictate a lower price for the unit.
According a regulatory filing, AIG will receive a termination fee from Prudential worth £152.6 million ($223.9 million) on July 1.
Shares of AIG (AIG, Fortune 500) rose more than 1% in premarket trading Thursday. 
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 32,627.97 | -234.33 | -0.71% |
| Nasdaq | 13,215.24 | 99.07 | 0.76% |
| S&P 500 | 3,913.10 | -2.36 | -0.06% |
| Treasuries | 1.73 | 0.00 | 0.12% |
| Company | Price | Change | % Change |
|---|---|---|---|
| Ford Motor Co | 8.29 | 0.05 | 0.61% |
| Advanced Micro Devic... | 54.59 | 0.70 | 1.30% |
| Cisco Systems Inc | 47.49 | -2.44 | -4.89% |
| General Electric Co | 13.00 | -0.16 | -1.22% |
| Kraft Heinz Co | 27.84 | -2.20 | -7.32% |
|
Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More |
Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More |
Honda and General Motors are creating a new generation of fully autonomous vehicles. More |
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More |
Whether you hedge inflation or look for a return that outpaces inflation, here's how to prepare. More |
