Icahn takes stake in AIG, calls for breakup

Wed Oct 28, 2015 4:56pm EDT
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By Michael Flaherty and Richa Naidu

(Reuters) - Billionaire investor Carl Icahn on Wednesday urged American International Group Inc (AIG.N: Quote) to break itself apart, targeting a $78 billion insurer in one of the largest activist campaigns this year. AIG shares jumped almost 5 percent in heavy trading after the release of the proposal, which Icahn said was supported by hedge fund manager John Paulson.

Around two weeks ago, Icahn gave the company a heads up that he was taking a stake and was publishing a letter, according to a person familiar with the matter. The person added that AIG has hired an outside advisor to help it deal with Icahn's campaign, a sign the two sides may be girding for a fight.

The bet by Icahn shows how top tier activists are targeting larger companies, and that no management team in Corporate America is immune from a dissident approach.

Icahn published a letter on Wednesday advising CEO Peter Hancock to spin off AIG's life and mortgage units into public companies. The move would return more cash to shareholders, Icahn said, and help AIG rid itself of a regulatory burden.

AIG shares surged 4.9 percent to $63.89. Paulson, who owns 1.1 percent of AIG, added a quote to Icahn's letter that said AIG can trade at over $100 per share.

Icahn's regulatory angle refers to part of the 2010 U.S. financial reform known as Dodd-Frank. The legislation mandated that the Federal Reserve regulate all banks with assets exceeding $50 billion as well as certain non-bank entities.

AIG's near collapse in 2008 was the driving force for Dodd-Frank's inclusion of non-bank entities. The insurer received $182.3 billion in federal bailout money.

Four U.S. companies labeled non-bank "Systemically Important Financial Institutions" (SIFIs) are subject to enhanced regulation and supervision by the Fed: AIG, GE Capital, Prudential Financial and MetLife Inc (MET.N: Quote).   Continued...

Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York February 11, 2014.    REUTERS/Brendan McDermid