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Treasury at Odds With Banks on Pricing of AIG Offering

Just days before the highly-anticipated secondary offering of American International Group shares is set to be marketed to investors, the sellers are at loggerheads with the bankers they have hired over where to price the deal, say people familiar with the matter.

AIG
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AIG

Officials from the U.S. Treasury Department, which owns 92 percent of AIG’s shares and expect to sell that stake down in chunks in the coming year or two, have indicated a desire to price the stock at level relatively close to its current trading price of about $31 , say these people.

But some of the Wall Street underwriters who are working on the deal have argued that $30 is the highest the shares could possibly be priced, these people add, and believe that a considerably lower valuation, even $25 per share, would enable the Treasury to sell a good deal more stock, more quickly.

Pricing discussions are still fluid, people familiar with the matter cautioned, and no final decision is likely to be made until late this weekend.

With closely-watched deals of this size, eleventh-hour posturing on both sides is to be expected as the sellers seek the best possible economics and the bankers argue for a larger-scale deal.

During the throes of the 2008 financial crisis, AIG was bailed outby the US government, which eventually came to own the vast majority of the insurer’s common stock.

But as the economy recovers from the recession, the Treasury Department has been eager to sell its stakes in the many companies it bailed out — including entities like AIG, Citigroup , and Ally Financial — and has already done so profitably in many cases.

Because of the sheer size of both AIG and the government’s stake in it, the Treasury selldown is expected to take at least 18 months altogether.

The first tranche of that sale is scheduled to begin its marketing phase next Wednesday, when AIG officials, accompanied by their bankers, will hit the road to pitch their story to investors.

Final pricing of the deal is expected around May 24, people familiar with the matter have said.

The banks advising AIG and the Treasury on the deal are Bank of America , Deutsche Bank , Goldman Sachs , and JPMorgan Chase .

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