AIG has approached some of the world’s biggest investors with a view to them taking stakes in AIA, the US insurer’s Asian operation, with strong interest from China, according to people familiar with the matter.
As a result, AIG is considering placing as much as 30 per cent with institutional investors and wealthy tycoons, rather than offering minor stakes in the initial public offering, they added.
The likeliest cornerstone investors are sovereign wealth funds.
But Chinese insurance companies and some of China’s largest banks are said to be looking at both taking stakes and financing others, although it is unclear whether the Chinese Banking Regulatory Commission would approve.
China’s insurers are not allowed to invest more than 15 per cent of their assets overseas and no more than 10 per cent in one public company, China’s industry regulator said on Wednesday.
China’s State Council will decide which bidders to allow.
“Everything is in flux,” said one person involved in the process. “The funding for these investments is unprecedented.”
The SWFs to have expressed an interest in AIA include the Singapore funds GIC and Temasek, as well as several Gulf SWFs, including those of Abu Dhabi, Kuwait and Qatar.
However, the outcome will depend at least in part on bankers’ valuation of AIA.
“If the price is reasonable, there will be interest from within the region,” said one investor considering taking a stake. “They want the market to believe there is huge interest but not many investors have the balance sheet to even think about it.”
The investor thought the value of AIA’s IPO could be about $26bn, in line with comparable public insurance companies, or about 1.2 times book value.
However, AIG and its masters in the US government hope to raise at least $30bn.
Private equity firms are also interested, although there are obstacles. Their own investors generally balk when buy-out firms take minority stakes in public companies.
Moreover, private equity groups like to put a lot of debt on the companies they buy – difficult to do when taking smaller positions.
There is still a question as to whether AIA will be able to hit the October to November window for its IPO. The timetable requires a filing in Hong Kong by early September.