DealZone

from Breakingviews:

Taxpayers come second to company in AIG plan

American International Group is throwing off its shackles. But taxpayers will be locked in for a while yet. The company’s deal with the government over its $100 billion of bailout funds makes the insurer’s finances simpler and healthier. That’s potentially good for shareholders. But initially the plan largely just rearranges the government’s interests. It is hard to see how it gets taxpayers cash back any sooner, while increasing their risk.

Bob Benmosche, the AIG boss, understandably likes the deal. It will remove the New York Federal Reserve as a senior secured creditor and swap the $49 billion scarlet letter of government bailout preferred shares for common stock. That should allow him to normalize a borrowing relationship with lenders right away and give him more flexibility. As for dealing with the government, the Treasury will take on the remaining New York Fed interests, leaving only one master for AIG to deal with.

Mr. Benmosche is right that the stigma of being one of the holdout recipients of Troubled Asset Relief Program aid as the program winds down wouldn’t be good for credibility. But AIG’s cheerful notion that the plan “provides for full repayment” of taxpayers is premature. Some $20 billion of New York Fed loans will be repaid, but the remaining Treasury interest will be ratcheted down the capital structure. Whether its 92.1 percent stake in AIG ends up being worth enough to repay taxpayers is up to financial markets.

To be fair, the Treasury would be in the money today. And Mr. Benmosche, having improved AIG’s performance, wants to increase its value further. Meanwhile, the government is making money on its sale of Citigroup shares, a precedent that hasn’t gone unnoticed. But selling a less than 30 percent stake in the bank, initially worth some $25 billion, is taking the government longer than originally anticipated. Mr. Benmosche’s suggestion that offloading a far larger stake in AIG may take 18 months sounds optimistic.

Normalizing AIG’s financial situation is a step forward. And the government could make money on its equity stake. However, as investment advisers repeatedly warn, stock prices can go down as well as up. Mr. Benmosche and his colleagues can breathe easier as soon as the plan gets locked in; taxpayers will have to wait.

from Breakingviews:

Uncle Sam’s AIG exit likely to be drawn out

There's no quick way for the U.S. government to exit American International Group <AIG.N>. Converting $49 billion of preferred stock to common shares and selling them would, like the government's exit from Citigroup <C.N>, take a while. And that's assuming other share sales, needed for separate repayments relating to AIG, go smoothly.

As of June 30, AIG owed the government just over $100 billion -- though a further $4 billion has since been repaid. AIG has also made progress offloading assets. Big examples include the IPO of AIA, the Asian unit currently expected to debut on the Hong Kong market in the next month or so, and the $15.5 billion sale to MetLife <MET.N> of American Life Insurance, or Alico, which is winding its way towards closing. The New York Fed converted debt into preferred shares in these entities worth $16 billion and $9 billion, respectively, and the deals will help pay that off.

Back at AIG itself, there are around $49 billion of preferred shares owned by the Treasury. The Citi example shows how that block of prefs might be swapped into common equity and then sold, over time. In the Citi case, the government is turning a profit on its shares, potentially making the idea interesting for AIG as well.

Deals wrap: Disentangling from AIG

A protester yells at people in the AIG office building during a rally against government bailouts in New York's financial district, April 3, 2009.     REUTERS/Brendan McDermid American International Group and the U.S. government are moving closer to a deal on how the Treasury Department would exit its investment in the bailed-out insurer, sources said. *View article *View Bloomberg article

Southwest Airlines will purchase AirTran Holdings for $1.04 billion in cash and stock in a deal that will allow Southwest to expand its presence in major East Coast markets. The move by Southwest puts pressure on all major rivals, who are trying to strengthen their eastern markets to leverage more premium-paying business travel. *View article

Consumer goods group Unilever will buy hair and skin care company Alberto Culver for $3.7 billion in the latest move to rebalance its portfolio toward higher growth lines. Analysts said the price of the deal looked high, but could be justified by cost savings and by skewing Unilever’s business to more high growth, high margin categories. *View article

Deals wrap: A deal on insurance

A panel on top of AIA Central, previously AIG Tower, flashes the company sign at Hong Kong's financial Central district February 12, 2010.   REUTERS/Bobby Yip Asian bourses are bracing for more insurance IPOs over the next year, after AIA’s expected record offer next month, with regulatory changes and higher capital requirements forcing companies to tap stock markets.

“This is going to be the age of IPOs. There is more to come in Korea, China and India as well,” one banker said. *View article * View article on NAB pulling out of AXA unit bid *View WSJ article on AIG’s expedited plans to pay back taxpayers

The share price of Sohu.com, China’s No.2 online portal, is too low for the company to consider putting itself up for sale, its chief executive said amid a 15 percent jump in its shares over the past month on buyout rumors. *View article

Deals wrap: Is 3PAR a good deal?

File photo of a man inspecting a diamond at the Israel Diamond Exchange in Ramat Gan near Tel Aviv December 15, 2009. REUTERS/Gil Cohen Magen Dell is expected to soon give up its pursuit of 3PAR, either ceding to HP’s last offer of $30 per share or giving up at a few dollars higher, according to a Reuters survey of eight technology investors and analysts. * View article *Columnist Robert Cyran asks: Is 3PAR an overpriced bauble for HP?  * An MSN article makes the case that both Dell and HP are certifiable.

AIG faces the prospect of looking for another buyer for its Taiwan unit after regulators threw out its proposed $2.2 billion sale of Nan Shan Life to China Strategic.  There have been suspicions in Taiwan about the connections of China Strategic with political foe China, and concern it did not have the experience to run an insurance business.  * View article

Some high-profile IPO’s are under water and this is not sitting well. “Investors are sick to the back teeth of being treated like idiots,” Dan Nickols, at Old Mutual Asset Managers, tells the Financial Times. *View FT article

Deals wrap: Who’s interested in AIA?

The logo of the AIA tower is seen at its entrance in Hong Kong July 13, 2010.REUTERS/Tyrone Siu AIG has started talks with potential investors to sell stakes in its Asian life insurance business AIA ahead of AIA’s planned IPO, sources say. *View article* In a related matter, Prudential says its failed bid for AIA, which collapsed in May, will cost less than first expected. *View article

General Motors posts its biggest quarterly profit in six years a day ahead of an expected IPO filing. *View article *View article

Private equity firms that benefited from Dubai’s boom years are now looking to the emirate for reforms needed to revive the sector, writes Nicolas Parasie and Dinesh Nair. *View analysis

Deals wrap: Separating from the government

The American International Group building is seen in New York's financial district March 16, 2009.    REUTERS/Brendan McDermid  American International Group reports better-than-expected quarterly results and says it has started talks on disentangling itself from the U.S. government. The insurer is nearly 80 percent-owned by the government. *View article

Hedge fund investors scarred by global credit crisis losses are setting their expectations lower and beginning to content themselves with smaller gains they would have balked at two years ago.  *View article

“Being an entrepreneur is like eating glass and staring into the abyss of death,” Elon Musk tells TechCrunch. *View article

Deals wrap: Where’s the bid?

A sign on the fence marks Genzyme's plant in the Boston, Massachsetts neighborhood of Allston March 24, 2010. REUTERS/Brian Snyder Chances are, every big pharmaceutical company is running the numbers and weighing the pros and cons of acquiring Genzyme, but the focus is on French drugmaker Sanofi-Aventis, which has yet to deliver a bid. Citi expects a Genzyme deal to be worth $19.7-20.5 billion. * View article * More coverage

The merger market is crawling at its slowest pace ever, with deals taking longer to close as players at every step move with extra caution amid fluctuating stock prices. * View article

WSJ takes a look at Goldman and its dealings with AIG. * View WSJ article

Deals wrap: SSL is on the market

Models pose with a replica of a condom during the 2001 Durex Global Sex Survey Press conference in Hong Kong November 27, 2001. REUTERS/Kin CheungReckitt Benckiser agreed to buy Durex condoms maker SSL for $3.8 billion. SSL stock jumped on the news as potential counterbidders could include Johnson & Johnson and GlaxoSmithKline, which are looking to expand their over-the-counter businesses. * View article

AIG is set to elevate Goldman Sachs to the top role for handling the initial public offering of its Asian life insurance unit, sources said. Morgan Stanley was an early favorite to lead AIA’s aborted IPO last year, before Prudential offered to buy the unit and IPO plans were shelved. The Prudential deal subsequently fell apart. * View article

Is Facebook worth $11 billion or $30 billion? Investors, and underwriting banks, have been salivating over an IPO for months. MSN Money takes a look at how to value the social-networking company. * View article

Deals wrap: Taking AgBank’s temperature

It is going to be tough for Agricultural Bank of China’s (AgBank) IPO to match the first-day jump in share price enjoyed by its rivals, analysts say. Institutions are expected help stabilize the stock price of the politically sensitive IPO but liquidity, the economy’s health and a flood of new share issues are seen as action against the company. *View article *More coverage *Asia’s top IPOs graphic

Shares in cellphone maker Nokia edged lower as analysts questioned the wisdom of its possible purchase of Motorola’s network equipment unit to boost its weak North American position. *View article

The board of American International Group is expected to meet to consider the future of its AIA unit, with a public float seen as the most likely outcome, sources say. *View article