Deutsche, Goldman and Morgan Stanley to lead AIA IPO

The revival of the Hong Kong listing comes after Prudential's bid to acquire the pan-Asia life insurer collapsed in early June.

AIA Group has mandated Deutsche Bank, Goldman Sachs and Morgan Stanley as global coordinators for its upcoming initial public offering, which has been revived after Prudential's $35.5 billion bid to acquire the company collapsed in early June, sources said yesterday.

The company is expected to add other banks as bookrunners later on.

AIA's parent company, American International Group (AIG), confirmed earlier this week that it will proceed "as soon as practicable" with its previously announced plan for an IPO of its wholly owned Asian life insurance business on the Hong Kong stock exchange.

"After reviewing various options to monetise AIA's substantial value, we have concluded that an IPO is our best option," AIG's CEO Robert Benmosche said in a statement issued on Monday.

The selection of the three global coordinators answers a couple of questions that have occupied market watchers since it became clear that AIG would again go down the IPO route that it was pursuing before Prudential launched its takeover bid on March 1, namely whether Deutsche Bank and Goldman Sachs would still be on the deal the second time around.

Clearly they are. In fact, Goldman has been elevated from a joint bookrunner last time to a global coordinator. Those questioning whether the bank would be on the deal at all had referred to the political situation in the US where Goldman was facing a lawsuit by the Securities and Exchange Commission related to its marketing and sale of toxic assets to various parties, including AIG, during the financial crisis. That suit was settled at a cost of $550 million late last week without Goldman admitting to any wrongdoing -- although it did acknowledge making a mistake. While the settlement may have cleared the way for Goldman to be included in the line-up of banks working on the AIA IPO, it is entirely possible that its legal problems wouldn't have had any impact on its role at all and that it would have been on the deal even if it hadn't settled.

Meanwhile, Deutsche Bank's role was seen to have become somewhat vulnerable after AIG on Monday replaced AIA CEO Mark Wilson with former Prudential CEO Mark Tucker, as the German bank had a strong relationship with the AIA management under Wilson. But, Deutsche is in, sources say, and retains the role as global coordinator that it held the first time around.

Morgan Stanley, meanwhile, was widely expected to be given a key role on the revived deal given its position as a financial adviser to the US Federal Reserve with regard to the government's stake in AIG.

Last time, AIA named seven joint bookrunners in addition to the two global coordinators and it remains to be seen whether it will go for as many this time and whether it will stick with the same names. Citi, which together with Goldman and Deutsche acted as an adviser to AIG on the sale to Prudential, is expected to be "safe", while Credit Suisse's potential role could come into question as it advised Prudential on the same deal. That said, Benmosche sits on the Credit Suisse board, which ought to give it a bit of an advantage.

The other banks that were mandated last time were Bank of America Merrill Lynch, Blackstone, CCB International, ICBC International and UBS.

Other details of the upcoming IPO, such as the size and timing, are still unknown. Based on a belief that AIG would sell up to 50% of the company in the IPO, the earlier deal was expected to raise more than $10 billion and perhaps as much as $15 billion. Meanwhile, market watchers appear to be divided on whether the company will target a listing in the fourth quarter this year or in the first quarter next year. Given that much of the preparations were done earlier this year - the IPO was initially planned for April - AIA should be able to get ready for a fourth quarter deal. However, its audited financials will need to be updated and sources say the company is likely to use September numbers to allow itself the flexibility of delaying the deal into 2011 if necessary. The financials including in the prospectus cannot be older than six months.  

The picture may become clearer later this week as the newly appointed global coordinators are set to meet with AIA to discuss the IPO tomorrow.

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