The board of American International Group is set to meet this week to consider the future of its AIA unit, with a public float seen as the most likely outcome, sources said on Tuesday.
An initial public offering of AIA, the Asian life insurance business of AIG, is a more attainable option, the sources said, as pursuing another acquisition offer would present a new round of execution risks and potential funding issues for a buyer.
The sources, who are directly involved in the matter, but are not authorized to speak publicly about it, said AIG’s board would meet in New York on Wednesday. No final decision on what path AIA should follow has been made, they said.
Speculation of AIA fielding an outside offer gained fresh attention on Tuesday. The South China Morning Post reported that four Chinese groups approached AIG and the U.S. Treasury Department soon after Britain’s Prudential withdrew its $35.5 billion bid for AIA in June after trying unsuccessfully to renegotiate the price.
While a second, knock-out offer is always possible, the spectacular flame-out of Pru’s bid took its toll on both companies, and led to internal wounds on both sides — including disagreements within AIG’s top management.
AIG declined to comment on the IPO and the Chinese offers.
AIA, seen as AIG’s Asian crown jewel, is a key cog in the bailed-out insurer’s plans to repay U.S. taxpayers, who now own nearly 80 percent of the company and have pledged $182.3 billion in rescue funds.
Chances of an AIA IPO have been bolstered after strong institutional demand for Agricultural Bank of China’s roughly $20 billion IPO, one source added.
The long effort to divest AIA has fostered tensions between Chief Executive Robert Benmosche and some AIG directors over the future of the business. Benmosche had asked the board for more time to explore options for AIA, besides just an IPO, sources had said earlier.
Banking sources have previously told Reuters AIG could sell up to a 50 percent stake in AIA to raise up to $15 billion through a Hong Kong listing.
Citing people familiar with the situation, the South China Morning Post said one potential buyer is led by Shan Weijian, chairman of the Pacific Alliance Group, who also formerly worked at Newbridge, the Asia unit of U.S. private equity firm TPG.
Shan told the newspaper the acquisition talks were “unconfirmed rumors” and declined further comment. He helped TPG buy control of Shenzhen Development Bank, which the buyout firm recently sold to Ping An Group, China’s No.2 life insurer, for a huge profit.
“I think this is a big fish that nobody can pass up,” said Francis Lun, general manager of Fulbright Securities. “It’s really rare that you get a good, sizeable company like AIA that’s profitable. Investors should jump at the chance to snap it up.”
Chinese institutions have been cautious in buying foreign financial assets, though they have shown far more interest in snapping up natural resources assets. The deals Chinese companies have done are far smaller in size compared to what Pru nearly paid for AIA.
Chinese buyers were said to be interested in AIA when it was up for sale early in 2009, but that process ultimately was pulled.
(Additional reporting by Sui-Lee Wee and Doug Young) (Editing by Dhara Ranasinghe and Muralikumar Anantharaman)
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