American International Group Inc (AIG), the insurer that counts the US as its largest shareholder, said it is in talks to sell 90 percent of its plane-leasing unit to a group including New China Trust Co (新華信託).
Other investors in the group are New China Life Insurance Co (新華人壽保險) and P3 Investments Ltd, together with China Aviation Industrial Fund (中國航空產業基金) and an investment arm of ICBC International (工銀國際), the New York-based insurer said yesterday in a statement.
A deal may value AIG’s International Lease Finance Corp (ILFC) at about US$5.5 billion, according to a person familiar with the matter who asked not to be identified because talks are private.
At that valuation, the sale of a 90 percent stake would mark the biggest Chinese acquisition in the US, beating China Investment Corp’s US$3 billion purchase of a stake in Blackstone Group LP in 2007, data compiled by Bloomberg shows.
ILFC, based in Los Angeles, is the largest aircraft lessor in China, with a 30 percent market share and more than 175 aircraft leased to 16 airlines in the Greater China region, according to the company.
“ILFC by its nature is a business that requires financial leverage, and AIG is a company that would like to reduce its leverage,” said Paul Newsome, an analyst at Sandler O’Neill & Partners LP, who has a buy rating on the insurer.
“Getting ILFC off of AIG’s balance sheet, I think would be viewed favorably and make the stock go up,” he said.
The insurer said after the close of regular trading that superstorm Sandy cost the company about US$1.3 billion after tax and reinsurance.
Credit swaps protecting against losses on the debt of ILFC declined, suggesting higher investor confidence. A deal could be announced as soon as Monday, according to a person familiar with the matter.
The insurer, which considered selling ILFC in 2009 as it worked to repay a US$182.3 billion US bailout, last year said that it planned an initial public offering of the unit.
AIG has narrowed its focus to global property-casualty coverage and US life insurance since its near collapse in 2008, divesting more than US$60 billion in assets to help repay its rescue.
“They’re better served by having a simpler organization,” said Meyer Shields, an analyst at Stifel Nicolaus & Co.
AIG acquired ILFC in 1990 for US$1.16 billion, data compiled by Bloomberg shows. It had 918 aircraft in its leased fleet as of September, with a book value of US$34.9 billion, according to the most recent quarterly report. The unit has more than 200 aircraft on firm order, including Boeing Co’s 787 Dreamliner and Airbus SAS’s new A320neo.
AIG, led by chief executive officer Robert Benmosche, has “consistently stated that ILFC is a non-core asset,” the insurer said in its statement.
“Any possible transaction involving ILFC would be subject to required regulatory approvals, including those in the US and China,” it said.