American International Group Inc (AIG), the insurer bailed out by the US government, agreed to sell its external fund management business to Hong Kong billionaire Richard Li’s (李澤楷) Pacific Century Group (盈科集團) for about US$500 million.
The agreement lifts to US$9.8 billion the amount AIG will raise through announced divestitures since its government rescue 12 months ago. The sale is the first of a major business unit since chief executive Robert Benmosche took charge last month. Benmosche has pared some asset sales planned by his predecessor, Edward Liddy, arguing that AIG can get higher prices by waiting for markets to recover.
“I don’t liquidate things, I build them,” Benmosche said during an Aug. 4 employee meeting. “When we get the fair value for those businesses, that’s when we’re going to sell them; it’s not going to be before.”
The purchase price for AIG Investments consists of a cash payment of approximately US$300 million at closing, plus additional future consideration based on performance and a continuing share of carried interest, New York-based AIG said in a statement on Saturday.
Benmosche halted the auction of a broker-dealer business that Liddy had put on the market, and said in an Aug. 11 meeting with employees that he plans to review AIG’s overall restructuring plan and come up with a new “vision” this month.
AIG previously announced sales of US$9.3 billion in assets, including an auto insurer, an equipment guarantor and a Japanese tower, to help repay US Federal Reserve loans extended as part of the firm’s US$182.5 billion bailout.
The portions of AIG Investments up for sale managed about US$88.7 billion of client assets in 32 countries, including stocks, bonds and investments in hedge and private equity funds.
Win Neuger will continue as chief executive officer and the existing management team will remain in place. Monika Machon will remain chief investment officer at AIG, a position previously held by Neuger.
“Pacific Century Group is pleased to sign this agreement and will be working to close the transaction in the coming months,” Tim Payne at Brunswick Group Ltd, an external spokesman for Pacific Century Group, said in an e-mail. “AIG Investments have a strong management team, running a substantial portfolio of assets. The company suits our investment philosophy of making long term investments in quality businesses.”
Richard Li, the son of Li Ka-shing (李嘉誠), Asia’s richest man, is chairman of Hong Kong phone company PCCW Ltd (電訊盈科).
The auction of AIG Investments attracted earlier interest from Franklin Resources Inc, the San Mateo, California-based fund manager, and Macquarie Group Ltd, Australia’s biggest investment bank, and New York-based Crestview Partners LP.
UBS Investment Bank acted as financial adviser to AIG and Perella Weinberg Partners acted as financial adviser to Pacific Century Group. Debevoise & Plimpton LLP served as legal adviser to AIG.
AIG’s US$182.5 billion federal bailout includes a US$60 billion credit line, an investment of as much as US$70 billion from the Treasury Department and US$52.5 billion to buy mortgage-linked assets owned or backed by the insurer.
AIG owes more than US$38 billion on the credit line.
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