NEW YORK, March 23 An initial public offering
by Blackstone Group LP [BG.UL] could allow insurer American
International Group Inc. (AIG.N) to make nearly a 20 times
return on its stake in the investment banker.
Blackstone, best known for taking public companies private,
filed late on Thursday for an offering worth up to $4 billion.
The company would sell about 10 percent to 15 percent of
itself, making its total value up to $40 billion.
AIG, the world's largest insurer, bought 7 percent of
Blackstone back in 1998 for $150 million - at the time one of
the largest investments ever in a leveraged buyout firm.
If the Blackstone IPO goes off at the high end of
expectations, that would now make AIG's stake worth as much as
$2.8 billion, analysts said.
"It's a good payoff for AIG," said Donald Light, an analyst
with Celent LLC. "AIG has been more innovative and
forward-looking with its investments than other insurers."
But AIG shares traded down on Friday after last night's
announcement by Blackstone. They were off 0.2 percent or 10
cents, at midday at $68.11 after trading as low as $67.90.
AIG has the investment in its Global Investments Group,
according to company spokesman Chris Winans. At the end of
2006, the group had a total of $670.4 billion of investments,
according to its annual report, he said.
The gain on its investment in Blackstone would be reflected
in AIG's book value. Since the insurer's book value is already
about $102 billion, it would not move the needle enough to get
investors excited, analysts said.
"It's so huge that a $2.8 billion gain doesn't look that
big," said Jim Albers, who follows AIG for Victory Capital
In addition to its 7 percent stake, AIG also committed to
give Blackstone $1.2 billion of investment capital back in
1998. But AIG would have recorded gains on that investment
annually since then, analysts said.
AIG's shares hit their 12-month high on December 18 at
$72.97 and have not reached that level again, despite reporting
fourth-quarter earnings that were eight times higher than a