Capital Research and Management, Prudential's largest shareholder, could potentially scupper the British insurer's $35.5 billion takeover of Asian rival AIA, the Daily Telegraph reported in its Tuesday edition.

Citing unnamed sources, the newspaper reported that Capital Research and Management was thought to have reservations about the deal and could prefer a break-up of Prudential.

Capital Research and Management said it would not comment on the newspaper report and Prudential declined to comment.

The offer for AIA, a subsidiary of American International Group , is conditional on a vote from the UK insurer's shareholders, and would be partly financed with a $21 billion rights issue.

Prudential is due to publish a prospectus relating to its $35.5 billion bid for AIA on May 5, ahead of listing shares in Hong Kong and Singapore.

(Reporting by Caroline Copley)