AIG's rejection of a lowered takeover offer by Prudential for its Asian life insurance business has shifted attention back to the company's IPO plans.
Among the key points under discussion in the world's most active IPO market is how much the company will float and what kind of valuation AIA could get from the offering.
Is 35.5 the ceiling? asked one investment banker, referring to Prudential's original $35.5 billion offer for AIA. This banker, who has worked with AIA in the past, reckons the company is worth more than that.
While he may have an axe to grind, he may also have a point.
AIA is a widely recognized brand in this region. The Pru offer produced a prospectus that highlighted some impressive numbers at AIA, with first-quarter sales rising 16 percent to $455 million from a year ago. Still, the timing of the IPO would be key as China's capital hungry banks are expected to raise about $60 billion over the next 6-8 months.
An AIA IPO process would almost certainly follow the primary offering of the Agricultural Bank of China expected in the next few months, which at roughly $30 billion is set to be the world's largest IPO ever.
An AIA IPO would also come as markets here have sold off, and risk appetite has faded. That could produce a valuation more closely related to the $30.38 billion revised offer that Pru offered the second time around.
Companies usually float around 25 percent of the company's total value. AIA's previous IPO plans were estimated to seek more than $10 billion.
Sources interviewed in Hong Kong on Tuesday said AIA would try to come to market before year-end, assuming the Pru offer officially dies.
If this comes to market in the second half, the market will have had the benefit of first half results, the banker said, implying that a presumably better, second quarter figure would only increase the chances of getting a higher valuation.
The Pru-AIA saga has had many twists and turns, meaning, at this point, anything is still possible.
A different source at the same bank who has worked with AIA said that AIG could always explore more options. Remember, Pru was not the only bidder for the asset, the source said.
But the most likely outcome is that Pru will walk away from its acquisition attempt, and that, in turn, will revive AIA's IPO process.
AIA and its advisers are ready to hit the road running with the offer, knowing full well that some of the Asian insurance IPOs were lapped up by investors. Japan's Dai-ichi Life Insurance raised $11 billion and Samsung Life Insurance Co Ltd raising $4.4 billion.
It is not yet clear whether the same IPO underwriters chosen in February, though it stands to reason that AIA would rather have banks familiar with the offering.
Given what happened with Prudential, another sale in the short-term might not be that possible, considering the sheer size of AIA, said Sally Yim, vice president at Moody's in Hong Kong and senior analyst who covers Asia-Pacific's insurance industry.
To revive the IPO, AIA would have to update its accounts and revise its financial numbers, so that what's presented to analysts and investors is the most current.
AIG, bailed out by the U.S. government during the global financial crisis, has chosen Citigroup, Credit Suisse, Goldman Sachs, BofA Merrill Lynch, UBS, CCB International and ICBC International to underwrite the IPO.
AIG had already chosen Deutsche Bank and Morgan Stanley as joint global coordinators for the offering. The Hong Kong stock exchange stipulates a minimum free float of 25 percent.
They could bump it to 50 percent, but then that is still a lot of money to be raised, the second person said, taking the total IPO proceeds to about $15 billion.
(Editing by Louise Heavens)