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AIG to Price AIA IPO Friday

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American International Group (AIG) Inc. is moving closer to launching what could be the world’s third biggest initial public offering (IPO).

AIG, New York, says AIG Group Ltd., Hong Kong, announced details of the AIA IPO Sunday.

AIG says in an AIA IPO report filed today with the U.S. Securities and Exchange Commission that the IPO could raise the equivalent of more than $14 billion to $16 billion in U.S. currency.

AIG hopes to sell a 49% stake in AIA, or about 5.9 billion shares, at a price of about $2.37 to about $2.54 per share.

Institutional demand for the shares has been so strong that AIG may close the offer 2 days earlier than originally planned and use options to sell more shares, increasing total proceeds to more than $20 billion, according to published reports.

The conversions here are based on an exchange rate of 1 Hong Kong dollar to 13 cents in U.S. currency.

AIG earlier made an unsuccessful effort to sell all of AIA to Prudential P.L.C., London (NYSE:PUK), for more than

$35 billion.

If the IPO goes as planned, it could value AIA as a whole at about $31 billion.

At press time, AIG shares were trading at $42.38 per share, up 2.19% from the previous close of $41.47.

Earlier, AIG announced that current common shareholders will receive 75 million warrants upon conversion of the U.S. government’s preferred shares to common shares, which is expected to occur by March 31, 2011.

Andrew Kligerman, a securities analyst at UBS Securities L.L.C., New York, says he has a positive outlook on the company in the short-term but is maintaining a neutral rating for the next 12 months.

The long-term rating reflects an estimate of the sum of the value of AIG’s parts and a discount related to uncertainty surrounding the warrant term structure, Kligerman says.

The warrants are “an incentive to remain long-term shareholders” in AIG, Kligerman says. “Although these warrants would currently be out-of-the-money, each could be valued at approximately $16 given their long-dated nature.”


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