Pacific Century Group, the business group owned by Hong Kong's Richard Li, will buy the investment advisory and asset management part of AIG Investments for $500 million. AIG Investments is a subsidiary of global insurance firm, American International Group (AIG).
The acquisition will be made by Pacific Century's subsidiary Bridge Partners, a limited partnership. AIG will retain its in-house investment operation, which has assets under management of around $480 billion. Earlier this year media reported that Pacific Century was considering joining a Franklin Templeton Investments-led consortium to pursue the AIG assets, but the final deal does not involve any other strategic or financial investors, at least at this stage.
The acquisition price of $500 million consists of a cash payment of $300 million plus an amount payable in the future. The future consideration, which has been valued at $200 million, will be split into a performance-linked note and a continuing share of carried interest.
AIG is selling assets to bolster its balance sheet and raise capital to repay a $180 billion US government bailout. On August 10, Robert Benmosche took charge of AIG as president and chief executive officer following the retirement of Edward Liddy. Benmosche is former head of MetLife, a provider of insurance and other financial services. He has also worked at PaineWebber and Chase Manhattan Bank. Two days later, on August 12, China Construction Bank agreed to acquire AIG Finance (Hong Kong) and AIG also closed the sale of its India-based outsourcing business.
"After conducting an extensive and rigorous auction process, we concluded that this transaction provides fair value for AIG and achieves the greatest long-term stability and potential for the business, its clients, business partners and employees," Alain Karaoglan, AIG senior vice-president in charge of divestiture, said in a written statement.
AIG's largest Asian asset up for sale, the Taipei-based Nan Sha Life Insurance business, is also currently in play and Morgan Stanley is working with AIG on the sale. Media has reported that Taiwanese credit card firm Chinatrust Financial is the frontrunner, with a bid likely to meet the $2 billion expectation that AIG has for the 40-year-old business.
AIG was advised on the AIG Investments sale by UBS and took legal advice from Debevoise & Plimpton. Boutique investment bank Perella Weinberg Partners provided financial advice to Pacific Century.
Pacific Century is acquiring a New York-based business, which operates in 32 countries and manages $89 billion of investments for institutional and retail clients, across private equity, hedge funds of funds, equities and fixed income. AIG Investments was formed in 1996 by consolidating the investment divisions of various AIG group companies.
Win Neuger will continue as CEO of the new business and the existing management team will remain in place, said AIG. Neuger has 35 years experience in financial services, of which 12 are with AIG.
Pacific Century has interests in infrastructure, property, satellite communications and other investments in the Asia-Pacific region across Singapore, Hong Kong and Japan. Like his father Li Ka-shing, who is well known as an experienced asset trader, Richard Li has tried to sell and restructure assets to create value. In 2007 Richard Li sold a controlling interest in Pacific Century Insurance, a Hong Kong-based life insurance company, to Belgian financial services group Fortis.
More recently, for the past 12 months Richard Li has been embroiled in controversy regarding his attempts to privatise his Hong Kong-listed telecommunications firm, PCCW. Richard Li and Pacific Century Regional Developments, Li's Singapore-listed holding company which owns a controlling interest in PCCW, tabled an offer to delist PCCW in November last year. But the delisting was derailed when allegations were made that Li had manipulated the meeting at which shareholders voted on the $2.2 billion privatisation proposal.
A Hong Kong appeals court in April backed an appeal from the Securities and Futures Commission claiming the vote was rigged and did not permit the delisting to proceed. Richard Li appealed the court's ruling in May, but last month a Hong Kong appellate court rejected his application for an appeal. PCCW can still petition the Court of Final Appeal directly. And last week the board of directors of PCRD announced that PCCW will shortly be filing an application to do so.