RPT-DEALTALK-Price, union trouble threaten AIG's Taiwan sale

(Repeats story filed late on Tuesday)

* Bidders complain AIG's $2 billion price too high

* Taiwan regulator keen not to sell Nan Shan too cheaply

* Nan Shan union asks AIG to settle pension first
(For more Reuters Dealtalks, click [DEALTALK/])

By Faith Hung and George Chen

TAIPEI/HONG KONG, Aug 18 (Reuters) - A rich asking price
could once again sink AIG's (AIG.N) plan to sell its Taiwan
insurance unit after an attempt at a sale earlier this year met
a similar fate.

American International Group, once the world's biggest
insurer before the U.S. government had to bail it out last year,
is seeking about $2 billion for Nan Shan Life, likely its most
expensive asset for sale in Asia.

But some potential buyers say the Taiwan unit's net assets
could be worth as much as 40 percent below the T$100 billion ($3
billion) that AIG claims, sources told Reuters.

As the Aug. 28 sale deadline nears, bidders are
re-evaluating the situation and some could walk away due to
disagreements over the price and lack of information provided by
the seller, said financial industry sources in Taiwan and Hong
Kong.

"Lots of people looked at Nan Shan and many of them walked
away," said one of the sources. "Some decided to bid while now
even those bidders want to have a second thought - there must be
a reason behind that."

In June, the Nan Shan sale initially attracted more than a
dozen potential buyers including leading U.S. firm JC Flowers
but less than half of them decided to go forward with a formal
bid. [ID:nHKG68156]

"The visibility is low," said another source, referring to
the financial information AIG had offered at the request of some
private equity firms over the last few days.

Last month, two U.S. buyout funds -- the Carlyle Group
[CYL.UL] and Bain Capital -- were selected by AIG and Taiwan
regulators to enter the second round of bids.

Carlyle is partnering Fubon Financial (2881.TW), parent of
Taiwan's No.2 insurer, while Bain has teamed up with Chinatrust
Financial (2891.TW), Taiwan's top credit card issuer, for the
bid. [ID:nTP1884]

"There is a 50 percent chance the bid will fail, or AIG will
have to lower its asking price," said an analyst at a European
securities house in Taiwan, who sought anonymity as he was not
authorised to speak to media.

Primus Financial, a new firm led by former top Citi (C.N)
banker for Asia, Robert Morse, also made it to the second-round
and has teamed up with Hong Kong investor China Strategic
(0235.HK) to fund its bid. [ID:nHKG359198]

Cathay Financial (2882.TW), the parent of Taiwan's biggest
insurer, is also in the race and the only one bidding by itself.

The second-round is believed to be the final one, and a
winner will be selected next week, said the sources who declined
to be identified because the bidding process is confidential.

Nan Shan, which turned a profit in the first half of this
fiscal year after a loss of T$46.7 billion ($1.4 billion) last
year, declined to comment on the bidding process.

REGULATORY HURDLE, UNION TROUBLE

AIG isn't the only one looking for a high price for Nan
Shan.

Taiwan's financial regulator is also aiming to keep Nan
Shan's price high, concerned about a negative backlash if people
think the asset is being sold at a fire-sale price, said another
source.

Media and scholars in nearby mainland China have criticised
Beijing for selling stakes in state lenders like China
Construction Bank (601939.SS) (0939.HK) too cheaply to
foreigners who later reaped big profits after selling their
stakes.

"The Taiwan regulator doesn't want to copy the history that
its counterpart in mainland China did," said the source.

"In this case, it's not just about AIG. If you sell Nan Shan
too cheaply today, tomorrow people will say the whole Taiwan
financial system is cheap, having Nan Shan as a benchmark deal,"
he added.

For their part, potential buyers also have an interest in
talking down the value of the company ahead of any sale.

Potential buyers could also be scared off by other issues.

Nan Shan's union, in front-page newspaper advertisements
last week, strongly demanded that AIG settle the pension
obligations they've accumulated over the past decades.

A victory for the union in the pension battle would make
that liability either too difficult or too high to estimate,
forcing some bidders to reconsider the fair value of the
company.

Nan Shan's union includes up to 40,000 sales agents, the
second-biggest in the island's insurance market.

"This is a major uncertainty and tough issue. We have to
figure it out clearly," said a source with one of the domestic
insurers, which is jointly bidding for Nan Shan with a foreign
fund.
($1=T$33.0)
(Reporting by Faith Hung and George Chen; Editing by Doug Young
and Mathew Veedon)