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August 01, 2012 at 10:19 AM
American International Group is buying the Hartford’s broker-dealer arm, Woodbury Financial Services, Inc.
According to analysts at Sandler O’Neill in Chicago, there are two keys to the transaction.
First, it will add to AIG’s SunAmerica Financial Group’s Advisor Group, which is one of the nation’s largest networks of independent broker-dealers.
Second, “It is a sign of AIG’s improved financial position that the company can consider acquisitions as part of its strategy.”
Analysts estimate that the deal could generate as much as $115 million in proceeds, with up to $90 million coming from AIG and $25 million coming from Woodbury in the form of a dividend.
The purchase price could be revised downward if Woodbury falls short of certain revenue targets before the deal closes.
The agreement is expected to close by the end of 2012, subject to regulatory approval and other customary closing conditions, according to Liam E. McGee, the Hartford’s chairman, president and CEO.
Paul Newsome, managing director of Sandler O’Neill’s insurance analysis group, says the Federal Reserve Bank of New York did not have to approve the transaction because its oversight of AIG ended once the Treasury Department acquired the N.Y. Fed’s stock interest in AIG, and AIG and the N.Y. Fed managed to close out the special purpose vehicles created to provide some cash for AIG.
He also said it was a “good sign” that the Treasury Department considered it another sign that the acquisition was in the best interest of AIG and its shareholders, with the government owning approximately two-thirds of AIG”s common stock.
“If Treasury didn’t think this was a good decision, it could have told them not to do it,” Newsome said.
