Business & Finance
Business and Finance
Business and Finance
Fri, July 9, 2010
Thu, July 8, 2010 
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: American International Group Inc. (NYSE: [ AIG ]), Prudential plc (NYSE: [ PUK ]), MetLife Inc. (NYSE: [ MET ]), ING Group, N.V. (NYSE: [ ING ]) and Aegon N.V. (NYSE: [ AEG ]).
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Here are highlights from Wednesdaya™s Analyst Blog:
Chinatrust Shows Up Again for AIG
Despite the lapse of the original share swap agreement with the Hong Kong-led consortium, Chinatrust Financial Holding Co. Ltd., one of the biggest financial groups of Taiwan, said on Monday that it is still eyeing American International Group Inca™s. (NYSE: [ AIG ]) Taiwan unit, Nan Shan Life Insurance Co. Ltd.
The consortium, formed by Primus Financial Holdings Ltd., a Chinese private-equity firm, and a former battery maker, China Strategic Holding Ltd., had agreed to buy Nan Shan in October 2009 for $2.15 billion.
However, the deal was stalled due to regulatory concerns in Taiwan about the buyers having ties with mainland China and being supported by Chinese funds. Besides, Taiwan had concerns over the buyera™s potential to own such a high profile business.
Amidst the concerns, the consortium announced the share swap agreement in November 2009 that Chinatrust would buy a 30% stake in Nan Shan for $660 million from China Strategic, and in exchange would give China Strategic a 9.95% stake in the Taiwanese financial conglomerate.
Although the swap agreement expired on June 25, Chinatrust showed interest in Nan Shana™s stake and agreed to renew its bid to purchase AIGa™s Taiwan unit, if a separate bid proved successful.
China Strategic and Primus have postponed the bid until October 2010, but would renew the agreement with Chinatrust once they are able to acquire the $2.2 billion Nan Shan unit. Primus, China Strategic and Chinatrust are thus awaiting approval from Taiwan.
Chinatrust stated that if the Taiwan regulators approve the deal, Chinatrust would buy the Nan Shan stake from China Strategic. However, in case the deal fails, AIG would put up Nan Shan for sale again and Chinatrust would again bid for it. Chinatrust would also explore other avenues if the Nan Shan deal doesna™t work out.
Management of AIG has been planning to exit Taiwan since October 2009, after the global economic breakdown created an unprofitable investment environment. However, the political concerns prevailing in Taiwan are keeping them from pushing the deal forward.
AIG and the consortium had already extended the deadline for completing the sale of AIGa™s unit by three months to October 2010, in the hope of satisfying the regulators. Additionally, the consortium had set aside $325 million of the purchase price in an escrow account for a four-year period, which will be utilized from time to time to enhance and maintain Nan Shana™s capital ratios of at least 200%, required by the Taiwan government.
AIG had been mulling over the sale of its businesses to pay back the remaining $182.3 billion bailout money to the US Treasury, which rescued AIG from collapse in 2008. In order to execute the same, on July 1, 2010, AIG planned to sell its two Japanese life insurance units a" AIG Star Life Insurance Co. and AIG Edison Life Insurance Co., which could fetch about $5 billion.
The company was also in talks with Prudential plc (NYSE: [ PUK ]) to sell its Asian life-insurance unit, AIA Group. The deal, however, collapsed, as AIG was not ready to settle for the lower value offered by Prudential.
AIG has already made significant progress toward its plan and sold its American Life Insurance Co. to MetLife Inc. (NYSE: [ MET ]) for $15.5 billion in March 2010.
Other than AIG, UKa™s Prudential and Dutch financial services groups - ING Group, N.V. (NYSE: [ ING ]) and Aegon N.V. (NYSE: [ AEG ]) pulled out of Taiwan in 2009, while Metlife sold its insurance wing in Taiwan in April 2010.
Although we do not see any significant downside regarding this issue, the Taiwan deal remains uncertain because the extension of the date questions the successful completion of the deal. We also fear that the buyers might pull out of the venture, should government intervention pose further hindrances.
We believe that AIG is putting in rigorous efforts to strengthen its business, manage costs, recover its investments tied with a recovering economic environment and repay the bailout money. The planned divestitures will help AIG repay, which will in turn liberate the company from pay restrictions.
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