Updated from 3:08 a.m. EST

LONDON ( TheStreet) -- Prudential PLC ( PUK) said Monday it would buy AIG's ( AIG) Asian unit for $35.5 billion.

Prudential will pay $25 billion in cash and $10.5 billion in new shares and other securities for AIG's American International Assurance subsidiary.

Prudential said the cash part of the deal will be financed through a rights issue of $20 billion and by issuing $5 billion of senior debt.

"This transaction offers the opportunity to bring together two leading companies, positioning the combined group to capture the future growth opportunity in Asia," Prudential said in a statement to the London Stock Exchange. "We believe the tansaction will both amplify and accelerate our stated strategy to deliver value to our shareholders."

Prudential said the merged company would be the leading life insurance company in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines. It will be the leading foreign life insurance business in China and India.

The news confirms reports earlier Monday and reports over the weekend that Prudential and AIG were "closing in" on a $35.5 billion sale of AIG's Asian life-insurance operations to Prudential.

Under the terms of the deal, AIG won't proceed with its planned initial public offering of American International Assurance.

A sale of the unit would help AIG repay funds it has received from the U.S. government, which bailed out the insurance giant during the depths of the global financial crisis.

Prudential PLC, which is headquartered in London, is not affiliated in any way with Newark, N.J.-based Prudential Financial ( PRU).

-- Reported by Joseph Woelfel in New York.

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