The proposed merger of American General of Houston and Prudential PLC of London may be in trouble. When initially announced on March 12, the stock swap was valued at $49.52 per American General share. That equates to $26.5 billion based on the 10-day trailing average closing price of Prudential stock as of March 9. On word of the proposed merger, however, the price of Prudential shares dropped dramatically. Since the announcement, there has been considerable speculation by analysts as to whether the deal will be completed.
On the day the deal was announced, the price of shares of Prudential stock fell 12 percent. By March 21, Prudential shares were down more than 16 percent, trading at $10.99 in comparison to the $13.15 (both calculated at exchange rate for March 12) at which Prudential stock was trading prior to the announcement. With the sell-off, the value of the deal has fallen to about $19.7 billion, as of March 21. Initially, American General shareholders would have received a premium on their shares of about 28 percent. As of March 21, the premium was closer to seven percent, with American General shares valued at approximately $39.20.