American International Group Inc. will sell its stake in Asian life insurer AIA Group Ltd., raising as much as $6.5 billion in what could be the second-largest deal in Asia this year.Completion of the sale will mark another step forward for AIG, which is shedding noncore assets, as it seeks to repay its debt to the U.S. government, which took over the company in a $182 billion bailout in 2008.
It will also remove the overhang from shares of AIA, a fast-growing life insurer that is well-positioned in Asian growth markets.
Kenneth Yue, an analyst at CCB International Securities Ltd., said AIG's exit from AIA improves the outlook on the Asian insurer's shares. "The minimal discount of the share sale shows strong demand for AIA's shares," he said.
AIA said Monday that AIG will sell a "significant portion" of its remaining 13.7% stake in AIA, and that Hong Kong trading of AIA's shares, which was suspended Monday before the market opened, should resume no later than Tuesday. The price will be set on Monday or Tuesday, it said.
A term sheet seen by The Wall Street Journal indicated that AIG would sell the entire stake. AIG began selling 1.65 billion shares of AIA at HK$29.65-HK$30.65 (US$3.82-US$3.95) a share in a block sale, which will enable it to raise US$6.31 billion-US$6.53 billion, the term sheet showed. The price range represents a discount of 3.2%-6.3% from Friday's closing price.
The sale comes a week after the last lockup period on AIG's shares ended.
AIG sold about two-thirds of AIA in a Hong Kong IPO in October 2010, raising US$20.5 billion to help repay debt to the U.S. government. It sold shares again in March and September this year, raising a total of US$8 billion.
Investors have embraced AIA shares. In July, the company reported a 10% on-year increase in net profit for the six months ended June 30. Its business value, a measure of profitability, climbed 28% during the same period.
In October, AIA struck a deal to buy ING Groep NV's Malaysian life insurer for about $1.73 billion, reflecting its aggressiveness.
As of Friday, its shares had risen 60% from its IPO price, to HK$31.65.
The sale of AIG's shares in AIA comes just days after the U.S. Treasury sold its latest block of shares in AIG, bringing its profit on the bailout to $22.7 billion.
Last week, AIG said it would sell up to 90% of an airplane-leasing business as part of continued efforts to repay government loans.
AIG isn't done with Asia, though. Once a leading global insurer, the company traces its roots to an insurance company founded in Shanghai in 1919. It said last month that it plans to form a joint venture with life-insurance unit of People's Insurance Co. (Group) of China Ltd., China's largest property and casualty insurer.
The joint venture will sell life insurance and other products throughout China.
AIG also bought US$500 million worth of shares in PICC's initial public offering last month.