China Investment Corp and Ping An are among the big institutional investors from the mainland who are pursuing substantial stakes in AIA, the Asian businesses of AIG, in this month’s share sale of up to $20bn, according to people working on the deal.
China Life, the world’s biggest life assurer by assets, and Taikang, another Chinese life company, are also lining up for stakes in the initial public offering along with most other significant regional life insurers, including the Asian arm of Prudential of the UK, according to one person involved.
The interest of mainland investors like CIC, which wants a stake of about $250m, according to a person close to the issue, shows how Chinese investors have come full circle after shunning the company initially.
"Initially there was reluctance on the part of China Inc to be part of this for political reasons. They did not want to be seen as bailing out the US and to be seen as rescuing AIG,” said one banker. “Now they don’t want to be left out.”
Underwriters had tried to woo CIC, China Life and others into the deal as cornerstone investors, which involves committing to hold shares for at least six months in return for receiving a guaranteed allocation.
But given the size of the deal and the fact that cornerstone investors would not get any discount on the price, CIC decided there was little advantage in coming in early, bankers added. CIC could not be reached for comment.
The IPO for AIA – which is being sold by its cash-strapped parent as it seeks to repay billions in bail-out funds to the US government – has also attracted some well-known international investors, including Paulson & Co, the US hedge fund manager, and Bruce Berkowitz’s Fairholme, which has beneficial ownership of 26.6 per cent in AIG and wants to invest $1bn in AIA.
AIG has a special option to increase the size of the stake it is selling from about 49 per cent to about 59 per cent, depending on demand. It has not yet been decided whether that will happen, but it appeared to be moving in that direction, according to one person involved. The sale is to be priced in a range of HK$18.38 to HK$19.68 per share on Thursday.
If both this special option is exercised and the traditional 15 per cent “greenshoe” overallotment option kicks in on top of that, then AIA could end up selling more than 8bn shares, or about two-thirds of the company, in a sale that will value it at up to $30.5bn.
In spite of talk of strong AIA demand, some local analysts say its main strength lies in its historic back-book of business already written in developed markets such as Hong Kong, Singapore and South Korea. These analysts have concerns about its ability to grow.
