The American International Group agreed on Sunday to sell up to 90 percent of its extensive airplane leasing unit to a group of Chinese investors in a deal that valued the business at about $5.28 billion. It is part of the insurance giant's effort to sell assets that it considers nonessential to its core operations as the company continues to recover from the financial crisis.
Under the terms of the deal, AIG will sell an 80 percent stake to a group that includes the New China Trust Company, the China Aviation Industrial Fund and P3 Investments. The consortium has the option of buying an additional 9.9 percent stake. If exercised, the move would bring in two additional investors: New China Life Insurance and an arm of the Industrial and Commercial Bank of China.
AIG will hold onto at least 10 percent of the business, and the insurer's chief executive, Robert H. Benmosche, will keep a seat on the company's revamped board.
The deal is one of the biggest acquisitions of an American company by Chinese investors, and is expected to undergo scrutiny by the Committee on Foreign Investment in the United States, the government body that reviews the national security implications of deals involving foreign buyers. The deal is also subject to other American and Chinese regulatory reviews.
The transaction is yet another asset sale by AIG as it continues to sell off nonessential businesses, largely to help pay back its taxpayer-financed rescue. Since its government bailout in the fall of 2008, it has disposed of major units like AIA, a big Asian life insurance operation, and the American Life Insurance Company, another large international operation.
AIG said it expected to eventually record a loss of about $4.4 billion on the sale, including an accounting charge of about $1.8 billion tied to the use of tax assets in the deal. The International Lease Finance Corporation, or I.L.F.C. as the division is commonly known, is one of the biggest in the world and has long been regarded as one of AIG's crown jewels. The nearly 40-year-old company claims as customers over 200 airlines in 80 countries. It owned about 918 planes in its fleet as of Nov. 15, according to a securities filing, and has commitments to buy 229 new fuel-efficient aircraft.
I.L.F.C. came under pressure during the financial crisis, burdened by an enormous debt load, though it has since rebounded. For the first nine months of the year, it earned $339.7 million, in contrast to a $736.4 million loss in the period a year earlier.
The insurer had long identified the business as one it was willing to part with, in part because the aircraft leasing business requires an intensive amount of capital to support. Last fall, A.I.G. filed to take the unit public. But a sale of the company proved more attractive, providing a quicker and more certain path to disposing of the business.
"This transaction creates a solid and strategic partnership for I.L.F.C.," Mr. Benmosche said in a statement. "While I.L.F.C. is an extremely strong business platform and AIG. will retain a minority stake as a passive investor, the aircraft leasing business is not core to our insurance operations."
The investor consortium will take advantage of the leasing operation's booming business in China, which the company said it expected to account for much of its future growth. About 176 of its owned planes are operated by Chinese airlines like Air China, China Southern and Shanghai Airlines, and I.L.F.C. opened offices in Singapore and Beijing this year to help keep up with demand.
"Our group shares a commitment to I.L.F.C.'s experienced management team, its operating philosophy, and its presence in the United States," Weng Xianding, the chairman of New China Trust, said in a statement. "This transaction allows I.L.F.C. to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia."
AIG was advised by Citigroup and the law firm Debevoise & Plimpton, while the buyers were represented by Credit Suisse and the law firm Simpson Thacher & Bartlett.