American International Group Inc. (AIG) will sell its shares of the AIA Group Ltd, listed in Hong Kong, to raise $6 billion to repay the bailout it received from the U.S. government in 2008.
AIG has 33 percent stake in the AIA, holding 3.96 billion shares. Reuters reported that 1.7 billion shares of AIG were offered at HK$27.15-27.50 per share. AIA’s closing price on March 2 was HK$29.20. This appears to be the right time to sell the AIA shares, as their value has risen 47 percent since last October.
During the 2008 financial crisis, the U.S. government had bailed out AIG for a total of $182 billion. An average of at least $28.72 a share must be received by the government to recover its investment. In 2010, AIG had sold out two-third of its shares in AIA in order to raise funds for helping it to pay back its rescue loan.
A public offering of the AIG common stock was completed by AIG and the U.S. Treasury in the second quarter of 2011. Following this, 200 million shares were sold for $5.8 billion by the U.S. Treasury and 100 million shares for about $2.9 billion were sold by AIG. As a result of this selling, the Treasury ownership in AIG is about 77 percent as of now.
Last month AIG had reported a record rise in the fourth-quarter profit mainly because of appreciation in the value of its stake in AIA. Subsequently, AIG shares have climbed by 28 percent this year to touch $29.80 on March 2.