American International Group Inc.
) announced its plan to sell the remaining 13.69% stake in its
Asian wing - AIA Group Limited (AIA) - for $6.45 billion. The
company's holding in AIA has been traded to a group of
AIG priced its present stake of 1.65 billion shares held in
AIA for HK$30.30 (about US$3.91) per share. On Monday, AIA closed
at HK$30.65 at the Hong Kong Stock Exchange, reflecting a
discount of 1.1%. Initially, the deal was promoted in the range
of HK$29.65-30.65 a share. The transaction is slated to close on
December 20, 2012, subject to fulfillment of regulatory
Goldman Sachs Group Inc.
Deutsche Bank AG
) as the joint-managers, while
JPMorgan Chase & Co.
) are the book-runners of the sale.Additionally, the net proceeds
from the sale are expected to be utilized for enhancing AIG's
In September this year, AIG had eliminated 6% share in AIA for
$2.0 billion. Before this, in March 2012, the company had raised
$5.6 billion from the sale of 1.7 billion shares or 13% stake in
Previously, AIG had raised about $20.5 billion from the
initial public offering (IPO) of AIA at the Hong Kong stock
exchange in October 2010, much higher than about $15 billion
expected earlier. However, AIG was then subject to a lock-in
period of 6 months and was also required to hold at least a
one-third stake in AIA for a year, post the listing.
Nevertheless, AIG had successfully vended off about two-third
of its stake in its AIA during October 2010, primarily to
cornerstone investors since such investors have a lock-in period
of 6-12 months on their investments. As of September 2012, the
company was free of any sale restrictions within AIA. On the
whole, AIG raised $35 billion from AIA's IPO and stake sale.
With the complete elimination from AIA as well as a thorough
riddance from the US government bailout loan of $182.3 billion
and its ownership in the company, this month marks a significant
period in the history of AIG. The sooner-than-expected wipe-off
of Treasury's stake accelerates the capital flexibility of the
company and helps retain the investors' confidence. However, we
believe that AIG is liable to be confronted by fresh regulatory
challenges from the Fed upon the complete dilution of the
Moreover, intense competition, higher expenses, volatile
equity markets, widening credit spreads and reduced interest
rates continue to showcase declines that is expected to
persistently pressurize the margins. Thus, we remain on the
periphery at the moment to analyse the managerial and financial
developments at AIG going forward.
Consequently, we maintain a long-term Neutral outlook on AIG
with Zacks Rank #3, which implies a short-term Hold rating and
indicates no clear directional pressure on the stock in the near
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