AIG can still get $35.5 bn from AIA

American International Group may still receive $35.5 billion for an Asia division after a purchase agreement with Prudential collapsed last week, the US Treasury Department said.

AIG may hold an initial public offering in Hong Kong for AIA Group, the Congressional Oversight Panel said today in a report, citing conversations with US Treasury Chief Restructuring Officer Jim Millstein. The March 1 deal to sell AIA to Prudential failed after the London-based insurer’s investors balked at the price and AIG rejected a reduced offer.

“Treasury officials have indicated to the panel that they believe that AIG will be able to realise value equivalent to the $35.5 billion negotiated sale price through an alternate strategy, perhaps involving an IPO,” said the panel, led by Harvard University law professor Elizabeth Warren.

AIG CEO Robert Benmosche, who is selling assets to repay a $182.3 billion US rescue, has options for divesting AIA, he told employees last week, without specifying them. The sale of AIA, with 320,000 agents and 23 million customers from China to Australia, was to be AIG’s biggest step in repaying US taxpayers for the 2008 bailout.

The New York-based insurer’s investment bankers indicated that AIG may garner $35.5 billion for AIA, Andrew Williams, a Treasury spokesman, said late yesterday in an e-mail.

Bankers estimated AIA would be valued at $32 billion to $36 billion after an initial public offering, people with knowledge of the figures said this month. The projections were delivered May 31 to AIG’s board as it weighed Prudential’s reduced bid of $30.4 billion for the business, said the people, who declined to be identified because the figures were private.

Goldman Sachs and Citigroup said the business value may be $32 billion to $34 billion, and Morgan Stanley estimated $34 billion to $36 billion, said the people.

The Treasury Department helped rescue AIG in 2008 after the firm’s soured housing bets pushed it to the brink of collapse.