LITTLE ROCK — American International Group Inc. raised a record $17.8 billion in the Hong Kong initial public offering of its main Asian unit, putting the insurer on course to repay its U.S. bailout money.
AIG sold 7.03 billion shares in AIA Group Ltd., or a 58 percent stake, at $2.54 each, the New York-based insurer said Friday in a filing. That makes it the largest Hong Kong public offering, exceeding the $16 billion raised by Industrial & Commercial Bank of China Ltd. in 2006, according to data compiled by Bloomberg.
The AIA shares may begin trading on the Hong Kong Stock Exchange on Friday, AIG said. The offering transaction represents a landmark for the stock exchange, which has seen numerous listings in recent years, but few of this magnitude.
Chief Executive Officer Robert Benmosche, 66, has said the divestment of AIA and another non-U.S. division will put AIG “well within striking distance” of repaying a Federal Reserve credit line included in the company’s $182.3 billion U.S. bailout. AIG turned to the public offering after the June collapse of a $35.5 billion deal to sell AIA to Prudential PLC after the London-based firm’s investors balked at the price.
“The IPO is the biggest money in the door for AIG and the U.S., without question,” said Clark Troy, senior analyst at Aite Group in Chapel Hill, N.C. “Success on this sale is the biggest step towards a government exit.”
AIG shares climbed 28 cents to close at $41.56 on the New York Stock exchange. The insurer has advanced about 41 percent this year as Benmosche announced dealsincluding a $15.5 billion sale of AIG’s other main non-U.S. life insurance division, American Life Insurance Co., to MetLife Inc. That sale will be completed by Nov. 1, MetLife has said.
AIA expects operating profit of at least $2 billion for the year ending November and operates in 15 Asian markets with 309,000 agents, 24,500 employees and more than 23 million in-force policies. The unit had about $1.78 billion in operating profit in 2009, down from $1.87 billion in 2008, according to its IPO prospectus.
Investors, including institutions and Hong Kong individuals, ordered more than $129 billion worth of AIA stock, according to two people with knowledge of the matter who declined to be identified because the information is private. The Kuwait Investment Authority, Guoco Land Ltd. and Wharf Holdings Ltd. are among companies that bought stock in the IPO.
“AIA’s anticipated market capitalization may earn it aspot within regional and global indexes,” said Charles Stucke, a senior managing director of Guggenheim Partners LLC. “Speculation about this is said to be driving interest” in the offering, he said.
Pricing was at the top end of the company’s range, “a very strong vote of confidence in AIA’s future and our ability to capture and realize the exceptional growth potential of the Asia Pacific region,” Mark Tucker, CEO of the Hong Kong-based business, said in a statement.
Business, Pages 33 on 10/23/2010