AIA Group Ltd.'s initial public offering will be closed to institutional investors two days earlier than planned in the share sale that may be boosted to $20.5 billion
The company also disclosed in a filing Sunday that its initial public offering could result in US$308 million in fees for the 11 banks involved with the transaction, adding to already flush business in issuing equity for investment banks in Asia.
AIA's management has already spent more than a week on the road gathering pledges from institutional investors to buy as much as two-thirds of the company from its parent, American International Group Inc. "We've had an incredibly enthusiastic response to this [offer]," AIA Chief Executive Mark Tucker told journalists via video link from San Francisco, where he is meeting investors.
He batted aside a question about whether AIG's intention to sell its remaining third of the company as quickly as possible after the IPO was dampening demand by saying investors were "clearly aware" of AIG's plans. According to a terms sheet seen by The Wall Street Journal, AIG has agreed not to sell its remaining shares for at least six months unless granted permission by the banks handling the offering in the final six months.
Mr. Tucker, a British citizen, stressed instead the opportunities for the pan-regional insurer in Asia's fast-growing economies."My strategy is essentially about organic growth; we have enormous headroom here," said Mr. Tucker, 52 years old, whom AIG named head of AIA in July.
Typically for Hong Kong, the conference took place in the ballroom of a swanky hotel and included a seven-minute corporate video stressing AIA's 90 years in Asia and its network of 300,000 agents in the field.
AIG is selling AIA shares worth as much as US$20.6 billion. Retail investors in Hong Kong, where AIA has its Asian headquarters, have been allotted 10% of AIG's offer and can start buying the stock Monday.
Local journalists asked about AIA's strategy in China, where AIA is the only foreign life insurer to own all of its mainland-Chinese operations but commands only a 1% market share. Mr. Tucker said AIA plans to open offices in second- and third-tier Chinese cities and target China's middle class.
He also saw bancassurance sales—in which an insurance company sells its products through banks—as another area for growth. AIA makes just 8% of new sales through 120 bancassurance relationships in the region. William Lisle, an executive at Aviva PLC, is expected to join AIA in December to help with the push deeper into bancassurance.
"We are now focused on moving from distribution agreements to long-term strategic partnerships," said Mr. Tucker, citing AIA's recent tie-up with Industrial & Commercial Bank of China Ltd. as an example. The alliance with ICBC will increase AIA's ability to sell products through the Chinese bank's branches, but Mr. Tucker said the partners haven't spoken in depth about the project as yet.
Mr. Tucker said AIA is targeting an operating profit before tax of no less than $2 billion in 2010, which he said would be a record year for AIA. AIA will price its deal Friday and is slated to list in Hong Kong on Oct. 29. The shares are on sale for 18.38 to 19.68 Hong Kong dollars (US$2.37 to US$2.54) each.
Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley are joint global coordinators for the IPO. AIG has hired 11 bookrunners to market the offer.
AIG will pay a gross underwriting commission of 1.75% on the offering and a discretionary bonus of 0.25%. At the mid-point of the price range, if no options to boost the size of the offering are exercised, AIG would fork out US$308 million in fees related to the IPO.
As of last week, IPOs, follow-on share sales and equity-linked issuance in the Asian-Pacific region had jumped by more than a third in value to a record $263 billion this year, according to data provider Dealogic.