AIG Taiwan Unit Buyer Seeks Favorable, Constructive Ending

By and Jonathan Standing | September 2, 2010

The buyers of American International Group Inc’s Taiwan unit will be constructive as they seek to pursue the $2.2 billion bid even after Taiwan’s regulators rejected it, a top executive said on Thursday.

Robert Morse, chief executive of Hong Kong investment firm Primus Financial, which partnered China Strategic in the bid, said the buyers were still considering an appeal over the rejection, and called the bid a “great opportunity” for the unit, Nan Shan.

“If something is good for the company, and good for the employees and good for the industry and good for the country, hopefully there’ll be a way it can be figured out how it will be allowed to proceed,” Morse told Reuters in a phone interview.

Taiwan’s economics ministry said on Tuesday AIG’s plan to sell Nan Shan to battery maker China Strategic and Primus did not meet criteria on experience in the insurance business and ability to raise funds.

Taiwan’s regulators had spent 10 months deliberating the Primus and China Strategic offer. The bid stirred political opposition and union protest in part over concern the buyers were connected with Taiwan’s political foe, mainland China.

Lawyers in Taipei said that the chances of an appeal being successful were not high.

“If the buyers come up with exactly the same arguments, they probably won’t win,” said John Eastwood, a partner at Taipei-based Eiger Law.

“If it was a political decision, they’re going to have to go back and sell their points. They may need to partner up with another group of investors to change the face of the deal.”

“The insurance industry is a highly regulated one. Broadly speaking, the government has fairly large powers to jump in. The ability of the government to quash approval is still quite broad.”

Another lawyer, who declined to be identified, said that the buyers may have the option of submitting a new bid with AIG’s approval.

Morse declined to say if he thought the bid had been politicized, but noted that the bidders had met the concerns of the regulators on funding, and had enough experience in their ranks to run the Nan Shan business.

“There may be some unspoken concerns which if voiced we would certainly work hard to address as we addressed everything else,” he said.

Morse, a former CEO of Citigroup’s Asia Institutional Clients group, said that the buyers had made commitments that more than addressed regulatory concerns and would take other steps if necessary.

“We have irrevocably committed to locking up 70 percent of our shares for seven years and that is an unprecedented commitment,” he said. “We have no intention of selling the other 30 percent of the shares that are not locked up.”

If regulators were uncomfortable with the offshore nature of that lock up, and if there was more comfort in an onshore Taiwanese structure, “we would be delighted to do that,” he added.

(Additional reporting by Faith Hung, Rachel Lee and Ralph Jennings in TAIPEI and Michael Flaherty in HONG KONG; Editing by Muralikumar Anantharaman)

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