American International Group Inc. (NYSE:AIG) has apparently decided to resume talks with MetLife Inc. (NYSE:MET) to sell the insurer its American Life Insurance Co. unit, known as Alico.
A report by the
Financial Times says that a sale of the unit could raise $15 billion. Preliminary talks with MetLife ended in March, when it got another bailout. Apparently at the time, AIG wanted around $20 billion for the unit, and MetLife offered $11 billion. Last March, other bidders for the unit included Axa SA (NYSE:AXA), Prudential plc (NYSE:PUK) and China Investment Corp., which are now no longer interested, according to the report.
AIG was in the process of
spinning off the unit in preparation for a listing in Hong Kong, similar to it's spin off of AIA, its Asian life insurance unit. However, a sale of the unit could allow the government to recoup some of its cash even earlier.
For its listing, AIG had already
chosen Deutsche Bank AG (NYSE:DB) and Morgan Stanley (NYSE:MS) to take AIA public in 2010. The IPO of that unit is expected to raise between $5 billion and $10 billion.
AIG had been planning on contributing the equity of AIA and Alico to separate special purpose vehicles, or SPVs, in exchange for preferred and common interests in the SPVs, and those will be listed. The Federal Reserve Bank of New York would have received preferred interests in the AIA SPV of $16 billion and in the Alico SPV of $9 billion.
However, AIG's stock has plummeted. On Thursday, Joshua Shanker at Citigroup Inc. (NYSE:C) said that shares of AIG will likely have no value after repayments are made to the government.
"Our valuation includes a 70 percent chance that the equity at AIG is zero," he said, according to Bloomberg.
Shanker's assessment isn't surprising. AIG has only announced $6.7 billion in asset sales since the first rescue in September, and the valuation of the insurer's units have been gradually declining.
The insurer is in the middle of several other asset sales. Here is the latest progress on the most prominent auctions:
- AIG has been in talks to finalize the deal with Franklin Templeton Investments Inc. on AIG Investments since May, and the price has fallen from $800 million to between $350 million and $450 million. A consortium including Temasek Holdings Pte. Ltd. of Singapore and Richard Li's Pacific Century Group and Franklin Resources Inc. were originally rumored to be finalizing a deal. The insurer expected to get as much as $500 million to $800 million for the asset.
- AIG's Advisor Group division, housed within its retirement services division, which consists of three broker-dealers -- SagePoint Financial Inc. of Phoenix, FSC Securities Corp. of Atlanta and Royal Alliance Associates Inc. of New York -- could sell for about $200 million. Private equity firms Clayton, Dubilier & Rice Inc. and Warburg Pincus have dropped out of the bidding for the division, leaving GTCR Golder Rauner LLC and several new potential buyers, The Deal's Michael Rudnick reported. However, the three broker-dealers have lost nearly 14% of their advisers since February.
- The sale of AIG's aircraft leasing unit, International Lease Finance Corp., or ILFC, could be finished soon. Greenbriar Equity Group LLC and Onex Corp. may be closing in on the acquisition of AIG's ILFC. The Financial Times had reported that the insurer has received second-round bids from private equity firms Thomas H. Lee Partners and Carlyle Group, Onex Corp. and Greenbriar Equity Group, as well as an unidentified third bidder. As Dealscape previously noted, ILFC has a book value of $7.5 billion as of Sept. 30, and bids were supposed to come in at around $5 billion. However, Reuters is reporting that the unit may sell for under $5 billion. The figure is not surprising considering AIG needs to repay $100 billion in debt and does not have the cash to meet debt obligations of $33 billion for ILFC's operations in 2009 due to the struggling airline business and loss of its federal commercial paper lending facility after key credit ratings were cut. The FT reported that the government may even extend AIG a $5 billion loan to divest ILFC, which should just about cover the purchase for the private equity firm that decides to buy the unit. The credit line would come from the $180 billion bailout the government has already extended to the insurer.
- The 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 (which might be a conflict because Blackstone is advising). Included in that is its Japanese headquarters in Tokyo, which may bring in more than $1 billion.
- Ski resort Stowe Mountain Resort is also up for sale, according to The Burlington Free Press.
- The auction for Taiwanese life insurance unit Nan Shan Life Insurance Co. began on July 3. Among the buyout shops reviewing information about the sale are the Carlyle Group, Kohlberg Kravis Roberts & Co., Affinity Equity Partners Ltd. and MBK Partners Ltd, sources tell Bloomberg. According to Dealscape, other bidders expected to participate in the auction include Primus Financial Holdings Ltd., Cathay Financial Holding Co., Chinatrust Financial Holding Co., Fubon Financial Holding Co., Shin Kong Financial Holding Co. and Mega Financial Holding Co. The unit is expected to command a $2 billion valuation.
To see the latest on all of the AIG auctions check out
The Deal Pipeline.
- Maria Woehr
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