AIG launches AIA share sale to fund $5 billion buyback

Thu Sep 6, 2012 9:43am EDT
 
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By Elzio Barreto and Fiona Lau

HONG KONG (Reuters) - American International Group Inc launched a widely-expected sale of a stake in its former Asian unit AIA, a move aimed at providing the insurer with partial funding to repurchase up to $5 billion of its stock from the U.S. government.

While the U.S. Treasury has not yet announced another share sale, its latest lockup expired early this month, meaning an offering could come at any time before September 30. AIG shares fell sharply in early trading on what was otherwise a strongly higher day for the U.S. insurance sector.

AIG's sale of up to $2 billion of AIA Group Ltd shares comes two days after a lock-up period on such a sale expired, but is only about a quarter of the $7.6 billion stake the U.S. insurer owned and could have sold. AIG had already sold $6 billion worth of AIA shares in March.

AIA, Asia's third-largest insurer, was spun out of its parent company in October 2010, when AIG Chief Executive Robert Benmosche oversaw the company's listing in Hong Kong after a failed takeover offer from Prudential Plc.

Since the listing, AIA's shares have soared about 34 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.

AIA has built a sprawling and successful business across the region, with an army of hundreds of thousands of agents. In July it reported better-than-expected first-half results, with net profit climbing 10 percent to $1.44 billion.

PREMIUM SURPRISE

AIG is offering about 600 million shares in a range of HK$25.75 to HK$26.75 each, equivalent to a discount of 2.1 percent and a premium of 1.7 percent to AIA's Thursday close of HK$26.3 ($3.39), a term sheet of the deal showed. It is restricted from selling the remaining $5.6 billion stake for three months, the term sheet noted.   Continued...

 
The logo of the AIA tower is seen at its entrance in Hong Kong July 13, 2010. REUTERS/Tyrone Siu