ING, the Dutch financial giant, was initially willing to pay $8.1 billion, but after due diligence, reduced its offer to somewhat less than $7.5 billion, according to people familiar with the situation. ING continues to talk with Aetna about either buying the two units or just buying pieces of the company.

Aetna, Hartford, Conn, said on Friday that although it was continuing talks with ING, it has also entered into discussions with other interested parties. The shares of Aetna, the country's largest health insurer, fell $3.875, or 5.3 per cent, to $69.50 in New York Stock Exchange composite trading at 4 pm Friday, reflecting investors' disappointment that a deal with ING wasn't coming along as expected.

ING's chairman Ewald Kist said negotiations with Aetna had broken down solely over price. "It came down to a difference of opinion over thevalue of the two businesses," Kist said in a phone interview Sunday. He said that ING is still interested in acquiring both Aetna Financial Services and Aetna International, contrary to speculation that ING had lost interest in Aetna International after getting a look at the unit's books.

The stalemate in talks could be little more than brinkmanship by both sides. "If a deal with Aetna is not going to work for us, we have alternatives, we have other candidates on our list," Kist said. "This isn't our only option." The advantage of an ING bid to Aetna was that it was one of the few offers for the whole financial-services business. If Aetna sells businesses in pieces, it faces being hit with high corporate taxes, according to analysts. For Aetna, Kist said, "the question is: Are other parties able and willing to pay a higher price than we offered?"

Aetna shareholders are hoping for a deal soon that will separate Aetna's nonhealth-care business from its health-insurance business. In March, a month after thecompany's chief executive and chairman resigned under pressure from shareholders because of a sagging stock price, the company announced that it was splitting itself in two. Aetna's off-again, on-again relationship with ING began in February, when ING's America Insurance Holdings Inc. and Wellpoint Health Networks Inc offered about $10 billion, or $70 a share, for the entire company. At the time, the stock was trading in the low $40s. The offer was rebuffed, but ING began discussions with Aetna again earlier this month, this time seeking only the company's financial-services and international units.

ING has in the past showed extreme patience in negotiating acquisitions. It stalked Bank Brussels Lambert for five years before finally taking over Belgium's second-largest bank in late 1997. Last month, ING agreed to pay $5.1 billion, plus the assumption of $1 billion in debt, for ReliaStar Financial Corp, a Minneapolis-based life insurer. "One or two more acquisitions the size of ReliaStar could do the trickas far as reaching our goal of being in the top 10 of US life insurers and asset managers is concerned," Kist said. Aetna's financial-services unit manages retirement plans and sells annuities and MFs, among other things. It has $77 billion in assets under management.

Separately, Aetna dodged a bullet by agreeing to work on its relationship with a group of hospitals in New York that had threatened to file a $1 billion lawsuit against the health insurer because of late reimbursement payments.

Aetna's US healthcare unit and the Greater New York Hospital Association, which represents 175 not-for-profit hospitals and long-term care facilities, said they established a "collaborative process" to improve their relationship and speed up reimbursements to the hospitals.

-- (The Wall Street Journal)