By Prudence Ho
-- AIG raises around US$6 billion by selling shares of AIA at HK$27.15 each in placement
-- AIG will hold around 18.6% of AIA after placement
-- AIA fell 7% early Tuesday after resumption of trading
(Adds AIA share performance in the first-second paragraphs, AIA background in the fifth-ninth)
HONG KONG (MarketWatch) -- Shares of Insurance company AIA Group Ltd. are trading lower by 7% early Tuesday after its major shareholder American International Group Inc. /zigman2/quotes/203700638/composite AIG +0.65% raised around US$6 billion by selling part of its stake in the Hong Kong-listed insurer in a placement.
At 0214 GMT, shares in Asian life insurer AIA Group--which were suspended from trading Monday--fell 7.0% to HK$27.15 after hitting an intra-day low of HK$26.75. The benchmark Hang Seng Index declined 1.1% to 21,019.
AIG said Tuesday it sold 1.72 billion shares--slightly more than a planned 1.7 billion shares--at HK$27.15 each, the bottom of its indicative price range of HK$27.15 to HK$27.50. The pricing represents a 7% discount to AIA's last closing price of HK$29.20 Friday, but is higher than the Asian insurer's HK$19.68 initial-public-offering price in October 2010.
AIG--which is restricted in selling its remaining AIA shares for a six-month lock-up period--will hold 18.6% in AIA after the placement, the announcement said.
New York-based AIG used to own AIA but sold two-thirds of the company in a Hong Kong initial public offering in late 2010. A one-year lockup on further sales expired at the end of October last year and AIG has been waiting for favorable market conditions to sell more.
Goldman Sachs Group Inc., Deutsche Bank AG, Citigroup Inc., Morgan Stanley, Barclays Capital, Credit Suisse, Bank of America Merrill Lynch, J.P. Morgan Chase & Co., Macquarie Group Ltd. and UBS AG are handling the sale.
AIG Chief Executive Robert Benmosche said in an earlier interview that one of the insurer's priorities this year is moving forward with asset sales to repay taxpayers and taking other steps to boost AIG's value. The AIA share sale will remove some volatility from AIG's quarterly results, which have seen large swings over the past year because of changes in the market value of its one-third stake in AIA.
AIG's own shares, meanwhile, have also risen since the start of 2012 and are above the minimum level where the U.S. Treasury Department can theoretically realize a profit for taxpayers by selling its stake.
The government has yet to announce plans to sell more shares but its next sale is expected in coming months.