Friday, September 7, 2012

American International Group, Inc. (NYSE:AIG) Initiates Stake Sale of its AIA unit

American insurance group, American International Group, Inc.(NYSE:AIG) on Thursday started the process for selling off a stake in AIA Group Ltd, which was formerly its Asia unit.

The company is selling $2 billion worth of its stake in AIA, out of the $7.6 billion of stock it owned. Earlier in March the company sold stock worth about $6 billion.

According to the term sheet, AIG is offering about 600 million shares in a range of HK$25.75 to HK$26.75 each, equivalent to a discount of 2.1 percent and a premium of 1.7 percent to AIA's Thursday close of HK$26.3.

It is restricted from selling the remaining $5.6 billion stake for three months, the term sheet noted.

AIA, the third largest insurance firm in Asia, was carved out of the parent group in 2010 when the entity was listed in Hong Kong, following an aborted takeover attempt by Prudential Plc.

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The stake sale is expected to fund the company’s repurchase of up to $5 billion of its stock from the U.S. government.

The insurance group had received a massive bailout package from the U.S. government after the housing bubble burst in 2007 and the sub-prime mortgage crisis ravaged the financial and housing markets.

AIG has been slowly bringing down the government's stake in it over the years. The U.S. Treasury, which has handled the bailout, on behalf the government, has not announced a further share sale (in AIG) but the lockup of shares expired this month, which means that these shares can be sold.

Shares in AIG fell quite a bit in early trades on Thursday but subsequently recovered a bit to close down 59 cents at $34.22.

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