Prudential's bid for AIA Group was left in tatters after AIA's owner American International Group turned down a revised offer of $30.375bn (£20.727bn) - down from $35.5bn. The reduced bid was seen as a desperate attempt to keep rebellious Prudential shareholders on board after it became clear that some of them were seriously questioning the value of the deal, making it likely the Pru would struggle to have achieved the 75 per cent shareholder approval required.
Paul Mumford, senior fund manager at Cavendish Asset Management, caught the mood of disgruntled shareholders when he said: "The Pru has woefully misread the appetite of shareholders to back both a deal of this size and of this complexity. Combined with considerable sovereign debt in AIA, a chequered AIG legacy, and the near-impossibility of ever unwinding the deal if it proved to be unworkable, this is simply one gamble too far."
WHAT HAPPENS NOW?
AIG is 80 per cent owned by the US Treasury, but the AIG board voted against its chief executive Robert Benmosche and the wishes of the Treasury in rejecting the revised offer. AIG is likely to resurrect plans to launch an initial public offering, the avenue it was pursuing before the Pru produced its takeover offer.
For the Pru's chief executive Tidjane Thiam, failure to clinch a deal is a considerable blow, leading to speculation that he may step down. Indeed, Mr Thiam's judgement has already been called into question, when, in the middle of the AIA takeover, he accepted, and quickly turned down a position as a non-executive director of French bank Societe Generale.
Meanwhile, the financial cost of failure, including a £153m break fee and cancellation of the £14.5bn rights issue, will run to around £450m. And speculation over the company's future is already growing. Analysts reckon that a 'sum of the parts' valuation would make Prudential worth around 950p a share, although a more realistic selling price would be 700p.
