by Jenha White
The deal is valued at US$35.5 billion ($50.9 billion) and is the biggest asset sale since AIG was bailed out by the US government in 2008.
AIG president and chief executive officer Bob Benmosche says in considering two viable, very attractive alternatives to successfully monetize AIA including an initial public offering (IPO), it decided that a sale to Prudential enables AIG to realise value on a faster track to repay US taxpayers.
"This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG's restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders."
AIG will use $25 billion in cash from the AIA sale to redeem preferred interests with a liquidation preference of approximately $16 billion held by the Federal Reserve Bank of New York (FRBNY) in the special purpose vehicle formed to hold the interests in AIA, and to repay approximately $9 billion under the FRBNY Credit Facility.
Benmosche says combining Prudential, which has long been committed to enhancing its profile in Asia, and AIA, a remarkable Asian franchise, will create an unrivalled life insurance powerhouse in Asia, one of the world's fastest growing markets.
"Indeed, in undertaking this transaction, both we and Prudential are committed to preserving the AIA brand and the unique strengths of each of our sales forces, which is key to capitalising on AIA's long term potential," says Benmosche.
The transaction between Prudential and AIA includes all of the companies of the AIA Group operating in 15 geographical markets across Asia Pacific, including the company's international network of more than 320,000 agents and approximately 23,500 employees serving the holders of more than 23 million in-force policies and the more than 10 million participating members of its clients for group life, medical, credit life coverage and pension products.
The transaction has been approved by the boards of directors of both AIG and Prudential, and is expected to close by the end of 2010.
The transaction is subject to approval by Prudential shareholders, regulatory approvals and customary closing conditions.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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