AIG's Nan Shan Deal Back on Track - Analyst Blog
June 10 2011 - 10:08AM
Zacks
American International Group Inc.’s (AIG) $2.16
billion sale of its local unit, Nan Shan Life Insurance Co., has
finally been sanctioned by Taiwan’s Financial Supervisory
Commission (FSC). However, the sanction came with certain
conditions.
In January this year, AIG accepted the bid from Ruen Chen
Investment Holding Co. Ltd. (Ruen Chen) in order to divest its
97.57% stake in its Nan Shan unit in Taiwan, for a cash deal of
$2.16 billion. However, the deal was kept pending as it awaited a
regulatory approval, and as expected, the deal received the
approval in the first half of 2011.
The verdict came in after severe scrutiny and intense reviewing.
The FSC had been seeking the bidder’s capability of raising funds
for the deal as well as the strategy for carrying out Nan Shan’s
business in future. This strategy further included both the
financial and the operational aspects.
As a result, FSC has granted approval based on the condition
that the Ruen Chen Group has to maintain a deposit account of 6
billion Taiwan dollars or $208 million. Alongside, the Ruen Chen
will also have to seek permission from the FSC before carrying out
any level of financial transaction or investments.
This indicates the ceasing of over two-year resistance faced by
AIG from the Taiwan regulators. While the decision to divest Nan
Shan unit was taken in October 2009, it was followed by couple of
attempts to accelerate divestment but the regulators defied
permission.
Despite the sound fundamentals of Nan Shan, which enjoys the
third-largest position as per the market share in the Chinese
insurance market with more than 4 million policy holders, the
regulatory authorities overall appear to be concerned about vending
Nan Shan to the Ruen Chen Group. Their apprehension was based on
the acquiring party’s inadequate experience to take over such a
high profile business.
On the flip side, AIG has been able to get rid of a huge asset
burden through this deal, and has already listed Nan Shan as its
discontinued operation.
Overall, AIG has been working for the past several quarters to
sell its unnecessary businesses in an effort to repay the bailout
money. Through the second half of 2010, the company completed the
successful IPO of AIG’s AIA Group Ltd. while also disposing of
other assets such as ALICO toMetLife Inc. (MET),
Japan-based AIG Star and AIG Edison to Prudential Financial
Inc. (PRU) and AGF to Fortress Investment Group
LLC (FIG).
AMER INTL GRP (AIG): Free Stock Analysis Report
FORTRESS INVEST (FIG): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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