American International Group’s sale of its remaining US$6.4bn stake in Asian subsidiary AIA was both surprisingly timed and flawlessly executed.
Joint global co-ordinators Deutsche Bank and Goldman Sachs launched the deal in mid-December 2012, a traditionally quiet period when fund managers begin leaving for the Christmas holidays.
It was widely that expected AIG would sell another chunk of AIA after a 90-day lock-up period attached to an earlier sale expired on September 6 2012. The decision to launch a jumbo block on a quiet day in December, however, raised some eyebrows.
The timing proved perfect for AIG. AIA stock ended the previous day at HK$31.65, just shy of an all-time high of HK$31.80 on November 2 2012.
AIG and its lead managers decided to seize the opportunity to sell all of AIG’s remaining interest in AIA. An offer of 1.65bn shares was marketed on Friday, December 15, at an indicative price range of HK$29.65–$30.65 each, or a discount of 3.2%–6.3% to the pre-deal spot.
On Monday, December 17, trading in AIA was suspended to ensure little disruption to the share price during the deal’s execution.
The offering attracted a positive response from investors, thanks to the bookrunners’ efforts of targeting a group of key fund managers at the weekend. When the deal was launched, the market had got the message that the book was covered and momentum continued through bookbuilding.
The offering was quickly oversubscribed, allowing the block trade to be priced above the mid-point of the guidance range. The shares were priced at HK$30.30 each, a discount of just 4.3% to the pre-deal spot.
The final pricing was not as exciting as AIG’s selldown in September 2012, when a much smaller deal size of US$2bn allowed the company to price the shares at a premium to the pre-deal spot. Still, it was a better outcome relative to the first US$6bn trade in March 2012, which was done at a discount of 7% to the pre-deal spot.
About 350 investors from all over the world took part. Long-only funds, hedge funds, existing investors and financial specialists all participated.
The last selloff marked a perfect exit for AIG, which had monetised a total of US$35bn since AIA’s IPO in October 2010. Citigroup, JP Morgan and Morgan Stanley were also joint bookrunners.
The deal also had a positive impact on AIA, removing the threat of further disposals. AIG’s exit, coupled with AIA’s own strong business growth, pushed the stock to an all-time high of HK$40.45 on October 23 2013.
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