Prudential PLC has sued to invalidate American International Group Inc.s rival bid for Houston-based American General Corp., but analysts said they doubt the maneuver would work.
The suit, filed late Monday in Texas State District Court, says American International had not yet filed the papers necessary for its offer of $23 billion in stock. It accuses the company of gun jumping and cites the Securities Act of 1933, which prohibits offering securities without prior filing of a registration statement.
The suit also charges that American International made false and misleading statements by not adequately explaining the conditionality of that proposal or its value.
American International spokesman Joe Norton refused to discuss the suit, but the company issued a release Tuesday saying that it had signed a confidentiality agreement with American General and that the parties would start discussions immediately.
Analysts said Prudentials suit raises a nonissue. The bid will be properly made, said Robin Savage, an insurance analyst for WestLB Panmure in London. I cant imagine that AIG isnt going to follow a legal time line. I cant see that happening.
Prudential said it is simply protecting its contract with American General, which accepted its stock offer in March. The stock was then worth $26 billion but has slid to $20 billion. Last week American International tried topping that.
A Prudential spokesman, Steve Colton, said: We have a legally binding agreement with American General. Other companies cant come in and have off-the-record discussions with American General. If they came in with a definitive, filed offer, that would be different.
The petition seeks a temporary restraining order and a temporary and permanent injunction against American Internationals continuing to violate the Securities Act and interfere with the merger contract.
Cathy Seifert, an equity analyst for Standard & Poors in New York, said she wasnt surprised by the lawsuit.
Its fairly standard protocol, Ms. Seifert said. When this all plays out, reasonable minds tell us that the market liked the AIG offer better than the Prudential offer. Certainly, Prudential was within its rights to file, but itll be settled and the AIG offer will go through.
Charles Coyne, another London insurance analyst for WestLB Panmure, took much the same line. I think its a nuisance suit, Mr. Coyne said, but it also shows that Prudential is really serious about the U.S. market.
I suspect theyll find another U.S. deal, he said, but they really wanted this one, so perhaps theyre muddying the waters. But this suit is about a minor technicality that a lawyer spotted.
Mr. Colton denied there were ulterior motives in filing the suit. This suit is about a legally binding agreement we have. If American International Group wants to spike it, they have to do it legally, Mr. Colton said. To date they havent.
Mr. Colton also said he was not sure that Prudential would drop the suit if American International Group filed its offer. I cant answer that, he said.
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