The board of American International Group Inc is expected to meet this week to consider the future of the insurer's Asian life business, AIA, sources with knowledge of the matter told Reuters.
Four Chinese groups approached AIG and the U.S. Treasury Department soon after Britain's Prudential withdrew its $35.5 billion bid for AIA in June after trying unsuccessfully to renegotiate the price, the South China Morning Post reported on Tuesday.
An initial public offering for American International Assurance (AIA) was the most likely way forward, the sources said, although other options were also under consideration.
AIG declined to comment on the IPO and the Chinese offers. The sources declined to be identified as the details were not public.
AIA, seen as AIG's Asian crown jewel, is a key cog in the bailed-out insurer's plans to repay U.S. taxpayers, who now own nearly 80 percent of the company and have pledged $182.3 billion in rescue funds.
Institutional demand for Agricultural Bank of China's roughly $20 billion IPO has helped bolster the case for AIA's Hong Kong listing, one source added.
There is less and less doubt on AIA's IPO. The ABC's success stress the fact that, when you have large deals, a leadership company, deals get done, one banker close to AIA's IPO process said.
The ABC transaction illustrates that and should give whoever needs the comfort, the banker said, adding that a decision was expected very soon.
AIA's divestiture has fostered tensions between Chief Executive Robert Benmosche and some AIG directors over the future of the business.
Benmosche had asked the board for more time to explore options for AIA, besides just an IPO, sources had said earlier.
Banking sources have previously told Reuters AIG could sell up to a 50 percent stake in AIA to raise up to $15 billion through a Hong Kong listing.
Citing people familiar with the situation, the South China Morning Post said one group is led by Shan Weijian, chairman of the Pacific Alliance Group, who also formerly worked at Newbridge, the Asia unit of U.S. private equity firm TPG .
AIA declined to comment to the South China Morning Post.
Shan told the newspaper the acquisition talks were unconfirmed rumors and declined further comment.
Shan helped TPG buy control of Shenzhen Development Bank and recently sold the stake to Ping An Group <601318.SS>, China's No.2 life insurer, for a huge profit. Shan, a top Chinese dealmaker, is well known for his M&A experience in the financial sector in particular.
I think this is a big fish that nobody can pass up, said Francis Lun, general manager of Fulbright Securities.
It's really rare that you get a good, sizeable company like AIA that's profitable. Investors should jump at the chance to snap it up.
Lun said that financing such a deal could prove challenging for any of the parties.
$35 billion -- that's not chicken feed, he said. I think only the biggest banks and insurers like China Life have the resources to do it. You are buying a thing that's several times your size. ... They would have to raise money in the market, and I don't think investors will react well to that.
Another consortium is led by Zhang Songqiao, chairman of Hong Kong-based CC Land Holdings, while the third is led by Guo Guangchang, chairman of Shanghai-based Fosun Group, a large non-state-owned investment conglomerate, the paper said.
Guo has been ranked by Forbes as one of China's richest men for many years.
We had some interest in AIA, a Fosun spokesman told the paper. However, because of various reasons, we are not following up the deal for now.
The fourth consortium consists of a group of Hong Kong and Taiwanese investors.
All four groups have indicated they have strong support for their bids either from Chinese banks or insurers, the newspaper reported.
(Reporting by Denny Thomas and Paritosh Bansal; Editing by Chris Lewis and Dhara Ranasinghe)
(Additional reporting by Sui-Lee Wee and Doug Young)