Taiwan's Fubon Financial put its name forward on Wednesday as a possible buyer of American International Group Inc's (AIG) Taiwan unit after the collapse of a planned $2.2 billion sale to a Chinese-led group. Fubon, one of the losing bidders for the Nan Shan Life unit when it was put on sale in October, joins local rival Chinatrust Financial in expressing interest after Taiwan's regulator blocked its sale to battery maker China Strategic Holdings Ltd and financial firm Primus Holdings.
China Strategic told a media briefing it might appeal against the regulator's decision. CEO Raymond Or said any appeal would address the bidders' long-term commitment to the deal and their ability to fund the purchase. In a separate statement, the rejected buyer group's Taiwan entity Primus Nan Shan took aim at some of the arguments made by regulators, especially over its commitment to Nan Shan.
"The $325 million that AIG has put in an escrow account is the best proof that the investors can raise funds in future," it said in a statement. "Are there any major shareholders of any Taiwanese insurer that have set aside $325 million for future fund-raising? If not, shouldn't the FSC convince the public that they will ask shareholders of other insurance firms to do the same?"
AIG needs to sell assets to pay back the US government for its bailout after the global financial crisis, and while it can appeal against the regulators' decision or decide to keep Nan Shan, most bets are on a new sale. "AIG will need to find a new buyer," said Andrew Wang, chief investment officer of Manulife Asset Management in Taipei. "AIG is not going to change its strategy, It's just that it would take a while for them to find a new buyer."
He named another Taiwanese financial holding firm, Cathay Financial, as a possible buyer, while private equity firms such as Carlyle, which had partnered Fubon in its original losing bid, may also try to get in on the deal by tying up with Taiwanese entities. Nan Shan is Taiwan's No 3 life insurer by market share and its policyholders make up almost a sixth of the island's population. As such, regulators set tough conditions on any buyer and rejected the deal on the grounds that China Strategic and Primus did not have experience in insurance and lacked the ability raise future funds to run the business.
Concerns in Taiwan over China Strategic's links with political foe mainland China also added an edge to the bid. Regulators urged AIG to find a buyer that met their criteria. However a take-over by Fubon or Cathay, which both have existing life insurance units, could raise regulatory issues. Cathay wasn't immediately available for comment. Chinatrust, also a losing bidder first time round, has expressed interest but has not made any comment since the regulator's decision.
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