Primus Said to Consider Appealing Taiwan's Refusal of AIG Life Unit Bid

Primus Financial Holdings Ltd. is considering an appeal after Taiwan regulators rejected its $2.15 billion bid for American International Group Inc.’s Taiwan unit, said two people with knowledge of the matter.

Primus can appeal to Taiwan’s Cabinet within 30 days after receiving the official rejection, Vice Economics Minister Hwang Jung-chiou said yesterday. China Strategic Holdings Ltd., which is bidding for Nan Shan Life Insurance Co. with Primus, said today it hasn’t received official notification.

The financial firm set up by Robert Morse, the former Citigroup Inc. Asia investment banking chief, is seeking to buy Nan Shan as other foreign insurers including Aegon NV, Prudential Plc and ING Groep NV exited the market since 2009. AIG said yesterday it will consider scaling back operations at the Taiwan unit.

AIG’s Chief Executive Officer Robert Benmosche must sell assets and improve profits from property-casualty and retirement services to repay the firm’s $182.3 billion U.S. rescue. Nan Shan posted a $259 million net loss in the second quarter, compared with $79 million in profit in the year-earlier period.

Primus and China Strategic have spent about a year to win approval to buy Nan Shan and made concessions including a seven- year lockup of 70 percent of Nan Shan shares they planned to buy, one of the people said. AIG had agreed in October to sell its almost 98 percent stake in Nan Shan to the group.

Failed to Convince

The group failed to convince the Financial Supervisory Commission it has the financial capability and long-term commitment to operate the business, Wu Tang-chieh, vice chairman of the regulator, said yesterday at a briefing in Taipei.

To alleviate Taiwan’s concerns about funding commitments, AIG agreed to carve out a $325 million escrow fund from the sale proceeds.

China Strategic is raising $1.5 billion of equity to fund the purchase, one of the people said today. Other concessions include earmarking a NT$5 billion ($156 million) incentive payment for Nan Shan’s staff and insurance agents upon completion of the transaction, the person said.

China Strategic was “disappointed” at the outcome, Primus’s partner in the Nan Shan bid said in a statement today. The company’s Hong Kong-traded shares will remain suspended until China Strategic receives the official notice from Taiwan’s FSC, it said.

“After receiving the official notification, the company, Primus Financial and AIG will confer to determine the next steps going forward and decide whether to appeal this decision,” China Strategic said.

Aegon of the Netherlands sold its unprofitable Taiwanese life insurance unit to Zhongwei Company Ltd. in April last year. Prudential transferred its Taiwanese sales force and 94 percent of its liabilities on the island last year to China Life Insurance Co.

To contact the report responsible for this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net.

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