AIG Seen Leaning towards New Taiwan Unit Sale

September 7, 2010

American International Group Inc is leaning towards a new sale of its Taiwan unit, according to one of the original buyers, opening the way for a number of Taiwanese banks who have expressed interest.

Hong Kong-listed China Strategic Holdings Ltd said AIG may choose not to proceed with its agreement to sell the Nan Shan Life unit to China Strategic and partner Primus Financial after Taiwan regulators rejected the $2.2 billion deal.

“AIG has indicated its current view that it would be in the best interests of the parties to terminate the share purchase agreement,” the company said in a filing with the Hong Kong stock exchange on Monday.

AIG’s Taipei-based media relations company said on Tuesday that the insurer’s position that it was still discussing its next move had not changed.

Taiwan’s regulators rejected the bid last week, saying China Strategic and Primus did not meet criteria on experience in the insurance business and ability to raise funds.

It was the second failure in Asia for AIG’s attempts to sell assets to repay billions of U.S. taxpayer dollars used to bail out the company. In May, a $35.5 billion sale of its American International Assurance (AIA) unit in the region to Prudential Plc fell through.

Taiwan banks Fubon Financial Holding Co Ltd and Chinatrust Financial Holding Co Ltd have expressed interest in buying Nan Shan, while analysts have said Cathay Financial Holding Co Ltd may also be interested.

A source with direct knowledge of the sale process told Reuters that regulators were unlikely to take issue with bids from Fubon or Cathay, either alone or with partners such as private equity firms. But they would be wary of a Chinatrust bid, because the firm, Taiwan’s biggest credit card issuer, is heavily leveraged.

All three were losing bidders in the original sale of Nan Shan last October.

AIG has said if it cannot sell the unit at a price it deems fair it could reconsider its commitments, a comment analysts have taken to mean that it could stop issuing new business and slowly wind the company down.

The source, who asked not to be identified because of the sensitivity of the matter, said that should this happen, as a last resort Taiwan’s government would consider taking over Nan Shan.

The insurer’s policyholders make up nearly one-sixth of Taiwan’s population.

Shares of China Strategic stood 1.6 percent higher at 0400 GMT after plunging more than 40 percent when trading resumed on Monday after a three-day suspension pending the decision by Taiwan’s regulators.

Analysts said the stock was unlikely to gain much.

“Without the deal, I don’t see any business in the company which appears to be interesting,” said Patrick Yiu, a director at CASH Asset Management in Hong Kong. “I don’t see the firm having much value for the time being. The stock price simply fell back to the level from which it started to rise before the deal brought it into the light.”

(Reporting by Alison Leung and Donny Kwok in Hong Kong and Faith Hung in Taipei, writing by Jonathan Standing; Editing by Chris Lewis)

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