CCB Asia to buy 100% of AIG Finance
Updated: 2009-08-13 07:13
By Joey Kwok(HK Edition)
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The top of AIG Tower is reflected in a window of a nearby building in Central, Hong Kong. The troubled US insurer said yesterday it will speed up the public listing of its Asia life insurance arm AIA in Hong Kong. Bloomberg News |
HONG KONG: The ailing US insurer American International Group (AIG) said yesterday that it has agreed to sell its Hong Kong consumer finance business to China Construction Bank (CCB) Asia, after announcing plans to accelerate steps to list its profitable Asian life unit.
CCB Asia, a subsidiary of the mainland's third-biggest lender CCB, will buy 100 percent of the shares of AIG Finance (Hong Kong) Limited, a wholly-owned subsidiary of AIG, for $70 million in cash, plus the repayment of AIG intra-group indebtedness and deposit obligations of around $557 million, AIG said in its statement yesterday.
President and Chief Executive Officer of CCB Asia Charles Ma said the acquisition is a significant strategic move for the bank that will expand its consumer finance business in the Hong Kong market.
"We strongly believe that the acquisition will benefit us in the growth and diversification of our consumer-loan portfolio, and will serve as an excellent platform for growing our credit card business," Ma said in a statement yesterday.
CCB, holding $186 billion cash assets, has not made any acquisitions overseas since August 2006, when the Beijing-based lender bought Bank of America Corp's Hong Kong and Macao unit for $1.25 billion, gaining 17 outlets.
Mainland lenders including CCB, Industrial and Commercial Bank of China (ICBC) and China Merchants Bank are grasping the opportunity to expand outside the mainland, as the cash-strapped Western banks are forced to cut their overseas operations amid the global financial crisis.
AIG, once the world's biggest life insurer, has been bailed out by the US government four times. The $182.5 billion bail-out included an investment of $70 billion, a $60 billion credit line and $52.5 billion in purchasing mortgage-linked assets owned or backed by AIG.
The AIG Finance sale is not the first measure taken by parent company AIG to reverse its sagging standing. Seeking to raise funds to repay its loans, AIG said in May that it would accelerate steps to separate its profitable Asian life unit - American International Assurance (AIA) through an initial public offering in Asia. The offering could raise at least $4 billion, around 20 percent of the market value of AIA.
Sun Hung Kai Financial strategist Castor Pang said the acquisition, providing more fresh capital to AIA, may give a boost to the asset adequacy ratio of the insurer.
"Asset adequacy and product innovation are especially important to insurers," Pang said, "The acquisition will help improve the financial condition of AIA."
He also believes that the Asian life insurer will be listed very soon, as the strong cash position will facilitate the insurer's future operations and raise its IPO offer price.
AIG Finance is a restricted-license bank in Hong Kong, providing financial services that include time deposits, mortgages, private car loans, premium financing, personal loans, credit cards and various credit facilities.
By the end of June, AIG Finance had more than 500,000 customers and approximately 350 employees. The consumer finance unit also has total net loan receivables of HK$4.8 billion and a retail deposits balance of HK$1 billion.
After the acquisition, total net loan receivables of CCB Asia will reach HK$50 billion.
Deutsche Bank will be the financial advisor to AIG on the transaction, which is expected to be concluded in October pending approval by appropriate regulatory authorities.
Moving in line with the 3.03 percent drop in the benchmark Hang Seng Index, shares in CCB finished down 1.66 percent, or HK$0.1, at HK$5.94 in its Hong Kong trading yesterday.
(HK Edition 08/13/2009 page4)