Pru Raises $2 Billion to Help Pay for Pending Acquisition of AIG’s Japanese Life Companies

Prudential Financial Inc. has completed the transactions intended to pay for part of its roughly $4.8 billion acquisition of two Japanese life insurance companies of American International Group Inc.

The recently completed common stock and debt offerings to help finance a portion of its pending buy of AIG Star Life Insurance Co. Ltd and AIG Edison Life Insurance Co. resulted in about $2 billion in total proceeds, Prudential (NYSE: PRU) said.

The company expects the deal to close at the end of the first quarter of next year, said Bob DeFillippo, a spokesman for the Newark, N.J.-based Prudential. He said he couldn’t comment beyond what the company filed.

The financing transactions consisted of a public offering of more than 18.3 million shares of its common stock and a public offering of $500 million of 4.5% 10-year senior notes and $500 million of 6.2% 30-year senior notes under its medium-term notes, Series D program, Prudential said.

Earlier this year, Prudential, the second-biggest U.S. life insurer, said it would buy AIG Star Life and AIG Edison Life from AIG for $4.8 billion. The deal would be financed with a combination of common equity, senior unsecured debt and internal resources. Prudential also would take on roughly $600 million of existing debt obligations of Star Edison (BestWire, Sept. 30, 2010).

AIG (NYSE: AIG) is in the midst of trying to repay its debt to the federal government.

Meanwhile, MetLife Inc. recently completed its acquisition of AIG’s American Life Insurance Co. international subsidiary for $16.2 billion. The largest U.S. life insurer paid AIG $7.2 billion cash after adjustments and $9 billion in its own equity and other securities, subject to closing adjustments. (BestWire, Nov. 1, 2010).

Prudential Insurance Company of America currently has a Best’s Financial Strength Rating of A+ (Superior).

On the afternoon of Nov. 19, Prudential Financial’s stock was trading at $54.04, up 1.35% from the previous close, while AIG’s stock was trading at $42.76 a share, up 0.47%.

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)