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Bank of China to throw water on AIG asset sale?

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Published February 12, 2009 at 9:40 AM
Uh oh!

It appears that Bank of China Ltd. isn't bidding for American International Assurance, although it was cited as the preferred bidder heading into the process in reports by Dow Jones and the Financial Times. Let's hope it doesn't dampen or extinguish American International Group Inc.'s effort to sell off assets to pay back the government's $150 billion loan.

First-round bids on a stake of 49% or more in the life insurance unit are due at the end of February, with analysts pegging the sale with an estimate at about $20 billion.




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The FT article explains that Bank of China was the preferred bidder for the unit for the so-called "the crown jewel of AIG," because its bid might have been backed by CIC, China's sovereign wealth fund.

China's sovereign wealth funds keen to back a single mainland bidder in the auction, and that BoC had overtaken China Life -- the world's largest insurer -- as the most likely candidate. The current thinking in Beijing is that BoC is better equipped to manage foreign assets than China Life, which has more limited overseas experience," said one person familiar with the matter.
That would mean China Life Insurance Ltd. now has the advantage in bidding. However there are still many other potential bidders for the unit including HSBC Holdings plc, Prudential plc, Manulife Financial Group Inc. and Allianz Insurance Co.

The real question now is why Bank of China dropped out of the bidding. Financing isn't likely the reason with CIC backing the bid. That means there might be a reason that other bidders could drop out of bidding for the unit or the value of the unit could be less than expected.

AIG has announced several sales totaling around $2.3 billion:

The other sales pending including that of AIA could raise another $40 billion. Here's a list of all of the rumored asset sales and bidders.

  • It has been widely reported that AIG is in talks to sell personal car insurance unit, 21st Century Insurance, to Zurich Financial Services.The asset is rumored be be worth $2 billion.
  • AIG is supposedly in the works to sell three broker-dealers to a private equity firm (see The Deal's Pipeline). Rumored bidders include Bain Capital LLC, Hellman & Friedman LLC, Carlyle Group and Kohlberg Kravis Roberts & Co.
  • Philamlife could bring in around $4 billion. East West Banking Corp. has already scooped up Philam's Savings Bank, consumer bank and car financing. The rest of the assets including its life insurance business could be sold to any of the following bidders: The Ayalas' Bank of the Philippine Islands may team up with Prudential plc, First Pacific, AXA of France and the Metrobank Group. Manulife Financial of Canada and the partnership of Assicurazioni Generali SpA and Banco de Oro Unibankbidders are also apparently bidders for the unit.
  • International Lease Finance Corp. apparently could be worth $6 billion to $10 billion. The ILFC has reportedly drawn interest from several private equity firms including Carlyle Group, KKR, TPG Capital, Greenbriar Equity Group and sovereign wealth funds Temasek Holdings Pte. Ltd., Istithmar World PJSC, Kuwait Investment Authority and China Investment Corp. (see the story in The Deal's Pipeline). TPG dropped out of the process, a Reuters report said last week.
  • AIG Global Real Estate fund management business has around $12.4 billion in assets and $5.2 billion in equity capital. The unit could be sold for about $9 billion. Interested bidders could include BlackRock Inc. and Blackstone Group LP.

  • AIG Edison Life Insurance Co. and AIG Star Life Insurance Co. are also for sale. Bidders could include: Prudential Financial Inc., Manulife Financial Corp. Allianz Group, Aegon NV, Nippon Life Insurance Co., Tokio Marine Holdings Inc., Gibraltar Life Insurance Co. Ltd., T&D Holdings Inc. and Manulife Life Insurance Co. were rumored to be potential buyers.
- Maria Woehr

Also see:
Zurich may drive off with AIG unit
AIG: The house that Hank built
AIG: If you can't sell, go public?





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