AIG to sell $6 billion in AIA stock to repay bailout
By Denny Thomas and Clare Baldwin
HONG KONG (Reuters) - American International Group is selling part of its stake in AIA Group to raise about $6 billion, which will help the U.S. insurer repay part of its government bailout.
AIG is looking to sell about 1.7 billion AIA shares at HK$27.15 to HK27.50 each, according to a term sheet Reuters saw on Monday. That would be a discount of up to 7 percent to Friday's closing price.
The shares will go to institutional investors. AIG expects to use the net proceeds to reduce the balance of the U.S. Treasury Department's preferred interest in a special-purpose vehicle that holds the AIA shares. As of last month, those preferred interests were worth about $8.4 billion.
The Treasury also owns 77 percent of AIG's common stock following a massive $182 billion bailout in the wake of the 2008 global financial crisis.
At Friday's close, AIG's one-third stake in AIA was worth $14.9 billion. Following the share sale, the U.S. company will hold about 19 percent of AIA.
Institutions are expected to buy into the offering because of AIA's strong performance since the company's $20.5 billion Hong Kong IPO in 2010 -- Asia's third-largest public listing. But a big run-up in the stock price may have some feeling that the current offer is expensive.
With such a large sale and AIA's free float increasing, though, the company's weighting on benchmark indexes should rise, making the stock a target for fund managers tracking the Hang Seng and the Hang Seng Finance Index.
"The issue of getting the deal through shouldn't be a problem, plus there should be some index buying," said the head of a large U.S.-based asset manager in Hong Kong who was not authorized to speak publicly on the AIA sale. Continued...