American International Group Inc (AIG), the insurer that repaid a US bailout, plans to sell out of AIA Group Ltd for as much as US$6.5 billion, exiting the business from which it was formed in Shanghai in 1919.
AIG, based in New York, is selling about 1.65 billion shares in Hong Kong-headquartered AIA at HK$29.65 to HK$30.65 each, according to a term sheet.
AIG holds a remaining 13.7 percent stake in AIA, according to data compiled by Bloomberg.
AIG chief executive officer Robert Benmosche is focusing on US life insurance and global property-casualty coverage after divesting units to help repay a government bailout that swelled to US$182.3 billion.
The latest sale may mark the final chapter in a two-year exit process from what Maurice “Hank” Greenberg, who built AIG into the world’s largest insurer during his four-decade leadership of the firm until 2005, called one of his company’s “crown jewels.”
AIG sold about US$8 billion of AIA shares in March and September, following a 2010 initial offering that reduced the New York insurer’s stake to 33 percent.
AIA, which announced that AIG has started to sell “a significant proportion” of the remaining 13.7 percent stake in a statement to the Hong Kong stock exchange yesterday, did not reveal the exact number of shares on sale. Trading of Hong Kong-based AIA has been suspended.
The shares were to be offered yesterday as much as 6.3 percent lower than AIA’s closing price of HK$31.65 on Friday, based on the terms of the sale. AIG expected the shares to be priced yesterday or today, according to AIA’s statement.
AIA may resume trading no later than today, it added.
AIG will use the proceeds for general corporate purposes, it said in the statement.
The company would like to pay a dividend next year if its capital position is strong enough, Benmosche said on a third-quarter conference call last month.
The sale of AIA will reduce volatility in AIG’s quarterly results, which had swung with fluctuations in the market value of the company.
AIA traces its roots to 1919 when Cornelius Vander Starr, an American businessman, set up a fire and marine insurance agency in Shanghai. It was the first foreign-owned insurer to get a license in China, according to the company’s Web site.
Greenberg has called the company’s non-US life insurance divisions “crown jewels” that could not be replicated by rivals.
AIG’s shares gained 46 percent this year.
AIA’s shares advanced 31 percent in Hong Kong this year.