HONG KONG – American International Group Inc may raise as much as $6.5 billion from the sale of its remaining stake in AIA Group Ltd in Asia's second-largest block sale ever, exiting a business the U.S. insurer helped found nearly 100 years ago.
AIG is offering its 13.69 percent stake in AIA <1299.HK>, or 1.65 billion shares, in a range of HK$29.65-HK$30.65 apiece, sources with direct knowledge of the plan said.
That is a discount of up to 6.3 percent to AIA's close at HK$31.65 in Hong Kong on Friday, the sources said, declining to be identified as the terms of the offering weren't yet public. Trading of AIA was suspended on Monday at the company's request.
The sale marks the end of an era for AIG in Asia and its Chief Executive Robert Benmosche, who took AIA public in Hong Kong in the world's third-biggest initial public offering ever.
AIG was forced to sell parts of its massive business after the U.S. government bailed the company out in 2008 as it teetered on the brink of collapse. The United States ultimately sent $182 billion on the rescue. AIA was one of the assets it put up for sale.
Since AIA's $20.5 billion IPO, its shares have soared about 61 percent and become a top choice of fund managers looking to benefit from growing wealth in Asia and booming demand for insurance and other financial products.
The widely expected block offering of Asia's third-biggest insurer will be surpassed only by Vodafone plc's $6.6 billion stake sale in China Mobile <0941.HK> two years ago. The offering also comes one week after a lockup on the shares expired, adding to two other rounds of AIA share sales earlier this year that had raised about $8 billion in total.
Deutsche Bank AG
AIG, which expects to use the net proceeds from the AIA sale for general corporate purposes, said earlier on Monday that it had commenced a sale of the shares in Hong Kong by placing them to certain institutional investors. AIG did not identify the potential buyers or disclose the terms of the offering.
After selling $2.02 billion in AIA shares in September, AIG was barred from selling any further shares until December 10. The company had raised $6 billion from its first selldown in AIA in March.
OPPORTUNITIES IN ASIA
AIG's exit from AIG comes at a time when Asia's insurance industry is growing, attracting buyers hoping to tap into the expansion.
A Thai conglomerate bought HSBC's stake in Ping An Insurance <2318.HK> for $9.38 billion, while Hong Kong businessman Richard Li acquired ING's Hong Kong, Macau and Thailand insurance units for $2.14 billion.
AIG's exit from AIA has forced the U.S. insurer to strike out on its own in Asia, where it is focusing its attention on China. AIG became the biggest cornerstone investor in the $3.6 billion IPO of People's Insurance Company (Group) of China (PICC), also inking a joint venture to sell life insurance in the world's second-largest economy.
AIA's 2010 IPO came after a failed takeover offer from Prudential Plc .
AIG's business started in Shanghai in 1919 by U.S. entrepreneur C.V. Starr, with AIA ultimately becoming the name of its regional operation. Twenty years later, Starr temporarily relocated to the United States to avoid political instability in Asia, and following World War II, decided to run his U.S. businesses from New York. They came to be known as AIG, whose shares began trading on the New York Stock Exchange in 1984.
AIA has built a sprawling and successful business across the region, with an army of hundreds of thousands of agents competing head-to-head with Prudential in several countries.
AIA moved to split off from AIG after the U.S. company nearly collapsed in the wake of the 2008 financial crisis, prompting the U.S. government bailout.
On Friday, the U.S. Treasury Department said it has completed its final sale of common stock in AIG, cutting its shares in the insurer to zero four years after the bailout.
(Additional reporting by Fiona Lau of IFR, Michael Flaherty and Chyen Yee Lee; Editing by Ryan Woo)