Prudential plc announced Monday it has agreed to buy AIG Group Ltd., a pan-Asian life insurance company, from American International Group Inc.

London-based Prudential would pay approximately $35.5 billion, including approximately $25 billion in cash, $8.5 billion of equity and equity-linked securities, and $2 billion of preferred Prudential stock.

The deal would be the largest in AIG’s ongoing restructuring efforts. AIG [AIG] said Monday that the proceeds from the sale would be used to redeem preferred interests with a liquidation preference of approximately $16 billion held by the Federal Reserve Bank of New York and to repay approximately $9 billion under the FRBNY credit facility.

AIG intends to monetize the $10.5 billion in face value of Prudential securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods.

All net cash proceeds from the monetization of these securities will be used to repay any outstanding debt under the credit facility.

“In considering two viable, very attractive alternatives to successfully monetize AIA, including an initial public offering, we decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayers,” said Robert Benmosche, AIG’s president and chief executive officer. “This transaction … also gives us greater flexibility to move forward with AIG’s restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders.”

AIA has offices in 15 countries in the Asia Pacific region that house 320,000 agents and approximately 23,500 other employees. It offers group life, medical, credit life coverage and pension products to 10 million participating members.

The transaction has been approved by the boards of directors of both AIG and Prudential, and is expected to close by the end of this year. The transaction is subject to approval by Prudential shareholders, regulatory approvals, and customary closing conditions.


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