American International Group Inc. will take its time exploring options for divesting an Asia division after the $35.5 billion agreement to sell AIA Group Ltd. collapsed this past week, the unit’s head told employees.
AIA “remains a strong company” after the failure of the deal that would have combined it with Prudential Plc, Mark Wilson, chief executive officer of the Hong Kong-based subsidiary, said in a June 3 letter to staff.
AIG CEO Robert Benmosche, who is selling assets to repay a $182.3 billion U.S. rescue, has several options for divesting AIA, he said in a separate memo this week, without specifying the alternatives. The New York-based firm’s March 1 deal faltered after Prudential investors balked at the price and AIG rejected a reduced offer. AIG may return to an earlier plan of holding a stock offering, the Treasury Department said May 26.
“AIG, working with AIA, will take time to review our strategic options for the future,” Wilson said in the memo. “This is the prudent and appropriate course of action. The monetization of AIA is critically important for AIG.”
AIG has been in contact with potential buyers of a minority stake in AIA ahead of an initial public offering, including Qatar’s sovereign wealth fund, Temasek Holdings Pte Ltd., and Standard Chartered Plc, a person with knowledge of the discussions said this week.
Benmosche said in a June 1 memo that his separate deal to sell a unit to MetLife Inc. for $15.5 billion, and the ability of AIG’s plane-leasing unit to borrow in capital markets give the company “more flexibility” regarding the timing of an AIA sale. He also said in the memo that AIG would sell the unit “as quickly as possible.” Neither Benmosche, 66, nor Wilson said in their letters how many months a divestiture might take.
“Patience may be in order; the IPO environment is not getting better, particularly given the large amount of banking IPOs in the pipeline in Asia,” said Clark Troy, an analyst for research firm Aite Group. “AIA’s operating performance could appreciate further, which wouldn’t be a bad selling point.”
AIA, with 320,000 agents and 23 million customers, sells life insurance and retirement products in 15 markets from China to Australia. In the letter, Wilson thanked employees for their “tenacity and resilience” in preparing for the Prudential deal after AIG said in May that it would sell shares to the public.
The subsidiary is still making “strategic” investments, Wilson said, without naming them. The division’s pretax earnings surged 69 percent to $658 million in the first quarter, AIG said last month. Mark Herr, a spokesman for AIG, declined to comment.
‘Play Our Part’
The sale of AIA was to be AIG’s biggest step repaying U.S. taxpayers for the 2008 rescue. The government took a stake of almost 80 percent in AIG after the insurer was pushed to the brink of failure on soured housing market bets.
“AIA is committed to doing everything we can to ensure that we play our part in reaching a major milestone towards repaying the U.S.,” Wilson said.
Prudential CEO Tidjane Thiam apologized yesterday in a Bloomberg Television interview for costs incurred by the London- based insurer for the failed takeover. Prudential will pay about 450 million pounds ($655 million) in fees.