AIG to decide soon on AIA pre-IPO sale: sources

An office worker leaves the AIA tower in Hong Kong in this July 13, 2010 file photo.

HONG KONG (Reuters) - American International Group Inc (AIG.N) is expected to decide by early next week whether to enter formal negotiations with strategic investors for its Asian life insurance business, AIA, sources familiar with the process told Reuters on Wednesday.

That AIG has set a deadline for the strategic bidder process shows the company may go ahead with plans to list AIA on the Hong Kong stock exchange in the fourth quarter -- an IPO that could raise about $15 billion -- without an outside investor taking a stake beforehand.

Some Chinese investors have expressed interest in buying stakes in AIA ahead of the initial public offering. But expectations are running low for the pre-IPO auction to lead to a big deal due to the limited time available.

"The IPO train is moving quite quickly. That means there is limited ability to stop for a strategic investor to come on board and do due diligence and negotiate price," one source familiar with the process said.

AIG is set to name Citigroup (C.N), Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) as the joint global coordinators for the IPO, sources have previously told Reuters.

It has also kept Bank of America Corp (BAC.N), Credit Suisse Group AG (CSGN.VX), UBS AG (UBSN.VX), CCB International and ICBC International Holdings as bookrunners on the deal, a source familiar with the matter said on Wednesday.

AIG declined to comment. The sources declined to be identified since the discussions were private.

AIA had been on track for an IPO earlier this year but those plans got derailed when Britain's Prudential Plc (PRU.L) unsuccessfully tried to buy the unit in a $35.5 billion deal.

The addition of these banks means that AIG is sticking with the original group of underwriters for AIA, although with Citigroup and Goldman getting more responsibility, some roles have changed.

AIG, which is nearly 80 percent-owned by the U.S. government, is divesting AIA and other assets to repay taxpayers after receiving a $182.3 billion aid package at the height of the financial crisis.

The offering would make it the largest-ever Hong Kong IPO and would allow AIG to use the proceeds to pay back the U.S. government for its massive 2008 rescue package.

Strategic buyers offer confidence to prospective IPO investors, as they are long-term holders. Strategic investors also help set a valuation benchmark for the IPO.

Most major Western banks that took strategic stakes in Chinese financial groups before their IPO binge five years ago made huge profits on the stakes, although little strategic coordination occurred in return.

CHINESE INTEREST

Three to four separate consortiums, made up of Chinese investors, have approached AIG with proposals to take stakes in AIA ahead of the IPO, one source said. Some consortiums have indicated taking stakes of between 10 and 30 percent in AIA, sources said.

Sources added, however, that AIG is solely focused on the IPO and the strategic investors are not critical to the listing process.

China Life Insurance Co Ltd (601628.SS), Ping An (2318.HK) Cinda Asset Management Fosun Group, Hony Capital (an investment arm of Legend Group, parent of Lenovo Group (0992.HK)), and Alibaba.com Ltd (1688.HK) are among the parties that have expressed interest in buying a strategic stake in AIA, according to media reports.

Usually, pre-IPO stakes are sold at a discount to the IPO valuations and that then sets a benchmark for the public offering. A large pre-IPO investment will make it easy for AIG and its advisers to sell the rest of the offer to traditional institutions and mutual funds.

(Reporting by Denny Thomas; additional reporting by Paritosh Bansal in New York; editing by Ken Wills and Matthew Lewis)