AIG's Bankers Said to Value Asia Business at Up to $36 Billion
Stock Chart for American International Group Inc (AIG)
American International Group Inc.’s bankers estimated its main Asia division would be worth about $32 billion to $36 billion after an initial public offering, said people with knowledge of the figures.
The projections were delivered May 31 to New York-based AIG’s board as it weighed Prudential Plc’s reduced bid of $30.4 billion for the business, the people said. AIG directors decided later that day to reject the offer, which Prudential Chief Executive Officer Tidjane Thiam made after the London-based firm’s investors balked at the original $35.5 billion price.
AIG, which is selling assets to repay its $182.3 billion U.S. bailout, is revisiting plans for a Hong Kong offering of AIA Group Ltd. after the collapse of the Prudential deal. The insurer has been in contact with potential buyers of a minority stake in the unit ahead of an IPO, including Qatar’s sovereign wealth fund, Temasek Holdings Pte Ltd., and Standard Chartered Plc, one of the people said.
“The Asian business is a good solid business, so it will be attractive to some people,” said Reena Aggarwal, a finance professor at Georgetown University in Washington. “The market is still somewhat excited about the growth in Asia, particularly for the demand for insurance.”
Goldman Sachs Group Inc. and Citigroup Inc. said the business would be worth $32 billion to $34 billion, and Morgan Stanley estimated the value at $34 billion to $36 billion, said the people, who declined to be identified because the figures were private. AIA has 23 million customers across Asia and more than $60 billion in assets.
The AIA estimates don’t account for the so-called IPO discount that may reduce the actual per-share value AIG could expect in the offering, the people said. AIG is likely to sell only part of AIA during an IPO, they said.
Mark Herr, a spokesman for AIG, said he couldn’t comment, as did Andrea Rachman of Goldman Sachs, Mark Costiglio of Citigroup and Mary Claire Delaney of Morgan Stanley. Representatives of Temasek, Standard & Chartered and Qatar Holdings didn’t immediately return calls made outside of regular business hours.
Prudential said yesterday it terminated its March 1 agreement with AIG and will pay the insurer 152.6 million pounds ($224 million) as a breakup fee. The insurers agreed to waive any claims they may have against each other.
Prudential’s bid ran into trouble when some of its biggest shareholders objected to a $21 billion rights offer necessary to fund the purchase, and Thiam last week started negotiations with AIG CEO Robert Benmosche over a price reduction.
AIG’s board on May 31 rejected Benmosche’s recommendation to accept the $30.4 billion offer, said two people with knowledge of the deliberations.
The insurer is “now free to pursue a bunch of other options,” Treasury Secretary Timothy F. Geithner said yesterday. AIG management was “making incredibly impressive progress, frankly, in restructuring that entity.” The Treasury Department helped rescue AIG in 2008 after the firm’s soured housing bets pushed it to the brink of collapse.
AIG last year hired Morgan Stanley and Deutsche Bank AG as co-global coordinators of the IPO. It added more bookrunners including Goldman Sachs and UBS AG, people with knowledge of the matter said in February. Morgan Stanley is also advising the Federal Reserve Bank of New York on its stake in AIG.
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