Sep 14, 2008
AIG Rejects JC Flowers Deal, Plans Asset Sales
One thought that I expressed earlier was that any good assets or lines of business held by AIG (NYSE:AIG) would attract private equity firms and buyers who may be more likely to bid more than someone like Warren Buffett. So far, some interest has materialized but AIG rejected the suitors:
During a weekend scramble to shore up its finances, AIG turned down a capital infusion from a group of private-equity firms led by J.C. Flowers & Co. because an option tied to the offer would have effectively given them control of the company, an 89-year-old giant that does business in nearly every corner of the world.
The proposed option would have allowed the firms to acquire AIG for $8 billion under certain conditions. That price is just one-fourth of AIG’s current market value…
When AIG’s board rejected the capital infusion, the company’s recently appointed chairman and chief executive, Robert Willumstad, took the extraordinary step of reaching out to the Federal Reserve for help. Mr. Willumstad asked New York Federal Reserve President Timothy Geithner if the Fed could backstop some asset sales.
Two other private-equity firms — Kohlberg Kravis Roberts & Co. and TPG — offered to inject capital into AIG if the Fed agreed to provide the insurer with a bridge loan until its restructuring plan was completed.
AIG Scrambles to Raise Cash, Talks to Fed (WSJ)
I’m thinking that the most favorable outcome for someone like Buffett or another cash rich bidder would be no federal backstopping. This would not only expedite the sale of assets, but it would shake out the private equity firms who may be trying to compete. Right now the WSJ says that AIG plans to sell its domestic automotive business and its annuities units, but is also looking at selling its aircraft-leasing arm, International Lease Finance Corp. (ILFC).
Take a moment to look at ILFC’s financials, which can be found here. Looking at a recent 10-Q, you’ll see that the company’s book value is around $7.4 billion which would make it a behemoth to acquire today by any traditional private equity firm who depends on raising debt. If it is sold, it’s highly probable that the buyer will be someone with a cash horde (like Buffett) or a strategic buyer (major corporation) who hopes to add/expand their line of business in this area.
None of the articles I’ve read have mentioned anything about Buffett or Berkshire Hathaway so far, but I’m sure we will, unless AIG is playing incredibly hard with their negotiations. If that’s the case, they may end up filing for bankruptcy like Lehman Brothers (NYSE:LEH), another firm that played hardball in their negotiations for asset sales and capital infusions.
this bad new's in the finance world and there are various option available for acquiring the firm by purchasing it and issuing equity and debenture's.
this bad new's in the finance world and there are various option available for acquiring the firm by purchasing it and issuing equity and debenture's.
Kohlberg Kravis Roberts & Co. and TPG — offered to inject capital into AIG if the Fed agreed to provide the insurer with a bridge loan until its restructuring plan was completed which is good sign for future investor while i think various option available for acquiring the firm by purchasing it and issuing equity and debenture's in bad financial market condition is not good condition.
The proposed option would have allowed the firms to acquire AIG for $8 billion under certain conditions. That price is just one-fourth of AIG’s current market value which is quite good thing to share.
AIG Rejects JC Flowers Deal is going to impact the shareholder of both the company because large time has took off while too much expenditure has been incurred.