Low Bids Hurt AIG’s Taiwan Unit Sale Plan

TAIPEI (Reuters) – AIG’s (AIG.N) plan to sell its Taiwan Nan Shan Life unit was thrown into doubt on Friday as three bidders offered less than $1.5 billion each for the unit, far lower than the $2 billion expected by the troubled U.S. insurer, sources said. Primus Financial and Taiwan’s Cathay Financial (2882.TW) have submitted bids for AIG’s Nan Shan insurance unit, offering less than $1.5 billion, sources close to the companies said.

Carlyle Groupand Taiwan’s Fubon Financial (2881.TW) remain in the process, according to a separate source close to the matter. Private equity firm Bain Capital has pulled out of its joint bid with Chinatrust Financial (2891.TW), Taiwan’s top credit card issuer, said another source. The sources did not wish to be identified because of the sensitivity of the matter. With the bids below its expectations, there is a good chance that AIG, once the world’s biggest insurer before being battered by the global financial crisis, might fail to pin down a buyer this time for Nan Shan, its most expensive asset for sale in Asia.

“Now for certain, three of the bidders we know have offered less than $1.5 billion,” a source close to one of the companies told Reuters. “There might be a 50 percent chance that AIG will not agree to sell Nan Shan in this round,” said the source, who declined to be identified because he was not authorised to talk to the media.

That will mean that AIG would have to negotiate with the potential buyers or have another bidding round, analysts said.

“It is very likely AIG would not be able to find a suitable buyer this round,” said an analyst of a European securities house, who requested anonymity. “Of course, AIG has every intention to talk to the three
groups later, and ask them to raise their prices.

But what would AIG offer in exchange for a higher price? That remains to be seen,” the analyst said.

PRICE, UNION DISPUTES EYED

Several months ago, a dozen companies expressed interest in buying Nan Shan, and finally four consortiums were selected by AIG to take part in the second round of bidding. Friday was the deadline for submitting the bids. The four were Carlyle-Fubon, Bain Capital-Chinatrust Financial, Cathay Financial, and Primus-China Strategic (0235.HK), sources have said. Nan Shan and the bidding groups could not be immediately reached for comments.

The expensive price tag and growing pension disputes with Nan Shan’s union could once again derail AIG’s plan to sell the Taiwan unit after an attempted sale was scuppered earlier this year, sources have said. If AIG eventually sells Nan Shan, it will not be the first foreign financial services company to exit Taiwan. Last October, Holland’s ING Groep (ING.AS) sold its insurance unit to Fubon, while Britain’s Prudential (PRU.L) offloaded most of its Taiwan assets to Taipei-based China Life (2823.TW) earlier this year. The sales were part of ING and Prudential’s efforts to shore up their finances at home during the global financial crisis.

By Faith Hung and Rachel Lee 
(Additional reporting by George Chen and Michael Flaherty in Hong Kong; Writing by Lee Chyen Yee; Editing by Muralikumar Anantharaman)