AIG To Sell ALICO To MetLife

AIG announced March 1 that had agreed to sell AIA Group Ltd., an international life unit, to Prudential P.L.C., London, for about $35 billion.

“Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts and focus on enhancing the value of our key insurance businesses,” AIG Chairman Harvey Golub says.

AIG says it will use the proceeds from the deals to pay the U.S. government back for part of the bailout financing it received. If all goes as planned, AIG will generate a total of about $51 billion in deal volume, including $31.5 billion in cash and $19.2 billion in securities.

AIG would pay about $31.5 billion to the Federal Reserve Bank of New York, cutting what it owes to the New York Fed to about $45 billion.

The money paid to the New York Fed would include $6.8 billion in cash proceeds that AIG expects to get from MetLife when the deal closes, AIG says.

The special purpose vehicle formed by AIG and the New York Fed to hold AIG’s interests in ALICO would hold more than 78 million shares of MetLife common stock, about 6.9 million shares of MetLife preferred stock that could be converted into about 68 million shares of common stock, and 40 million equity units of MetLife with a liquidation preference of $3 billion, according to AIG and MetLife.

The ALICO special purpose vehicle intends to turn the MetLife securities into cash over time, after the end of the minimum holding period, according to AIG. The ALICO SPV would then pay the remainder of the resulting proceeds to the New York Fed..

The was a “result of a long and diligent study” and “an opportunity to acquire an international insurer that is very complementary to our company,” Henrikson said during the conference call.

The acquisition should improve MetLife’s growth in earnings and return on equity “both immediately and over the long term,” he said. “It significantly accelerates our global growth.”