AIG sells AIA stake as CEO seeks buybacks

Updated: 2012-09-07 06:50

By Bloomberg (HK Edition)

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American International Group Inc, the bailed-out US insurer, is raising as much as $2 billion selling a stake in AIA Group Inc as Chief Executive Officer Robert Benmosche accumulates funds to repurchase his company's stock from the Treasury Department.

AIG is offering about 600 million AIA shares at HK$25.75 to HK$26.75, according to a term sheet obtained by Bloomberg News. AIG plans to spend as much $5 billion buying back its shares, it said in a statement released via Business Wire.

Benmosche, 68, is raising funds to buy back stock of New York-based AIG from the US, which still has a stake of 53 percent, about four years after the government rescue. Treasury has trimmed its holding from 92 percent through four share sales as of Aug 22, and a lockup period on the next US offering expired Sept 2.

"If they can free up more cash they'll buy back more stock from the US taxpayer," Cliff Gallant, an analyst at KBW Inc, said before the sale was announced. "Everybody benefits by having the government exit and for AIG to truly break free from that, I think it is positive for the shareholders."

It is the third offering of shares in the Hong Kong-based insurer by AIG, which will leave the insurer with a 13.6 percent stake.

AIG had cut its AIA stake to 33 percent in a 2010 offering that raised about $20.5 billion and priced AIA shares at HK$19.68. AIG sold $6 billion more in March, with shares priced at HK$27.15. AIA, the third-largest Asia-based insurer by market value, closed 0.6 percent higher at HK$26.30 on Thursday.

AIG is offering the shares at a 2.1 percent discount to a 1.7 percent premium to AIA's closing price of HK$26.30 on Thursday, according to the term sheet. It is restricted from selling the remaining AIA shares in the next 90 days.

"Investors are willing to buy a small lot" given the current market conditions, said Kenneth Yue, a Hong Kong-based analyst at CCB International Securities Ltd, of AIG's decision not to sell all remaining shares in one go.

A larger share sale will probably involve a higher discount, affecting AIA's share price, said Yue in a phone interview. AIA shares fell 8.4 percent the day after AIG sold 1.72 billion shares at HK $27.15 on March 5.

"AIG in a way is trying to sell the stake with a minimal discount and support AIA's share price," said Yue.

The price range may indicate the share sale is in good demand from investors, said Yue, who has a neutral rating on AIA, with a price target of HK$29.

(HK Edition 09/07/2012 page2)