American International Group
Primus Financial, a new firm founded by Citigroup's
The deal priced Nan Shan at about 1 time price to book, which is fair when you compare 1.9 times for Cathay Financial <2882.TW> and Fubon Financial <2881.TW>, and 1 time for smaller rival Shin Kong Financial <2888.TW>, said Dexter Hsu, an analyst at JP Morgan in Taiwan on Tuesday.
With the Nan Shan agreement sealed, AIG is now likely to raise cash from two other major assets in Asia.
Hong Kong-based life insurer AIA is seeking a more-than $2 billion initial public offering while American Life Insurance Co, which generates half its revenue in Japan, is seeking a reported $5 billion in an IPO.
Both companies have also attracted acquisition interest, though nothing yet has materialized.
The sale of Nan Shan, in an auction run by Morgan Stanley
Primus, run by former Citi executive Robert Morse, and Hong Kong investment group China Strategic Holdings <0235.HK> will pay $2.15 billion for AIG's 97.5 percent stake in Nan Shan, AIG said on Tuesday.
Earlier this year, Primus co-chief executive Wing-fai Ng said in an interview with Reuters that Primus plans to use Nan Shan, Taiwan's No. 3 life insurer, as a base to expand to Hong Kong, Malaysia and Japan.
Nan Shan has assets of $46.4 billion and employs 36,000 sales agents in Taiwan and has a market share of 10 percent with its 4 million customers.
Some analysts and bankers involved in the deal said putting a valuation on the AIG's Taiwan life insurance unit was difficult.
The pricing is tricky. If you just look at the book value of Nan Shan, then the acquisition price is at a 30 percent discount, said Pandora Lee, an analyst with UBS.
First Commercial Bank and Taiwan Cooperative Commercial Bank in Taiwan are arranging a NT$20 billion (around $588 million) loan for Primus to back its purchase of Nan Shan, according to Thomson Reuters LPC.
FCB and Taiwan Cooperative are expected to each prefund NT$10 billion (around $294 million) of the loan before Primus settling the Nan Shan transaction.
The agreement marks the end of an auction that spanned several months and involved multiple bidders, including private equity firms, such as the Carlyle Group. Primus had been competing in the end with Chinatrust Financial <2891.TW>.
(Additional reporting by Rachel Lee and Chyen Yee Lee in TAIPEI and Parvathy Ullatil in HONG KONG; Editing by Valerie Lee)