American International Group Inc. (AIG) has set plans into motion in order to expedite cashing out of its entire stake in MetLife Inc. through public offerings, which could raise more than $9 billion in proceeds. Most of these proceeds would be used to repay U.S. taxpayers for the AIG bailout ahead of schedule.
In a statement on Tuesday, MetLife said that this week the public will be offered a total of 146.8 million MetLife common shares in addition to 40 million "common equity units". The common shares to be offered, which represent roughly 14% of New York-based MetLife, have a market value of about $6.8 billion based on Tuesday's closing price. The equity units have a face value of $3 billion.
AIG received $9 billion in MetLife stock, preferred shares and equity units in November as part of the consideration for its $16.2 billion sale of a large overseas life insurer. The other $7.2 billion was paid in cash.
The insurer was previously restricted from selling any of its MetLife securities for nine months after the deal closed, could only sell a portion of them between nine and 12 months from the closing date, and could sell the rest after 12 months.
MetLife has agreed to waive some of the provisions of the agreement to allow the offerings to proceed. But if they don't sell as many shares as planned and AIG still holds some MetLife securities after the sale, the original restrictions will continue to apply to the unsold portion, MetLife said.
The latest move comes as MetLife shares have gained more than 10% since March 2010, when the deal for American Life Insurance Co., or Alico, was originally struck. On Tuesday, MetLife shares were $1.32, or 2.8%, lower at $46.04 in 4 p.m. New York Stock Exchange composite trading. Shares fell about 4% in after-hours trading.
"We're taking advantage of the opportunity to monetize our interest in MetLife more quickly so we can continue our efforts to repay the government," an AIG spokesman said.
For MetLife, the sales could remove the effect of a potential overhang on the New York company's stock price over the next two years. The company is selling 68.6 million shares to repurchase and cancel convertible preferred shares held by AIG, which plans to sell all 78.2 million MetLife common shares it holds and the 40 million common equity units, which are convertible into MetLife shares in the future. AIG was given different types of MetLife securities originally so that its ownership stake in MetLife wouldn't go beyond a certain percentage.
The MetLife stock offering is being led by Goldman Sachs Group Inc., Citigroup Inc. and Credit Suisse Group AG. The offering is likely to be priced this week, according to a person familiar with the matter.
The proceeds from the MetLife common-stock sales will go to the U.S. Treasury, which is trying to recoup $18.2 billion from sales of stakes AIG holds in several companies. Besides MetLife Inc., those include AIG's remaining shares in pan-Asian life insurer AIA Group and Taiwanese life insurer Nan Shan Life Insurance Co. The cash proceeds from the sale of the equity units will be held in an escrow account, to indemnify MetLife against certain events.
The Treasury is separately trying to recoup a $47.5 billion investment in AIG by disposing of a 92.1% stake in AIG over the next two years. That stake currently has an implied market of $60.7 billion.