US insurer American International Group raised $500 million after selling over 250 million shares in China's PICC Property and Casualty in a block trade Monday night.
The accelerated 254 million-share sale launched early Monday evening in Hong Kong under the joint leads of Goldman Sachs and Morgan Stanley. It was marketed in a range of HK$15 to HK$15.48 per unit, representing a 5.06% to 2.03% discount to the March 30 close of HK$15.80 per share, according to a term sheet seen by FinanceAsia.
Shares finally priced at $15.15 each early Tuesday morning, a 4.1% percent discount to the March 30 close, netting AIG some $500 million in the share sale. All of the shares were secondary and represented 5.5% of enlarged share capital.
AIG will remain the largest shareholder in PICC P&C, the non-life insurance arm of Chinese insurance company PICC Group, with 1.2 billion H-shares in total, or 8.2% of total enlarged share capital.
The book closed early Tuesday morning Hong Kong time multiple-times covered, with over 100 lines participating in the deal. It was top-heavy, with the top ten allocations taking half of the deal. Allocations were skewed towards long-only institutional investors and funds focused on financials, a source close to the deal told FinanceAsia.
The shares on offer represented 5.5% of total issued capital. The deal represents 16 times 30-day trading average. AIG is subject to a 90-day lockup.
"By monetizing our portion of our PICC investment, we are de-risking our exposure and enhancing AIG's financial flexibility," said Peter Hancock, president and CEO of AIG in a statement. "We will continue to seek mutually beneficial opportunities to broaden our strategic relationship with PICC."
The company's recent share price performance enticed investors. PICC P&C shares are up 54.6% for the past 12 months and 4.77% year-to-date, and the company is trading at a forecasted 2015 11.65 times p/e.
PICC P&C secured $290 million via a rights offering in June 2013. At the time of the issue, AIG owned 31.9% of PICC P&C’s H-share capital and 9.9% of the company as a whole, and planned to invest a further $93 million into PICC P&C. The rest of the offering was underwritten jointly by CICC, Goldman Sachs and HSBC, although given the deal was oversubscribed, none of the banks put up money.
AIG was one of the investors when PICC Group raised $3.1 billion in its IPO in December 2012, purchasing $500 million worth of shares. It also set up a nationwide joint venture with PICC to distribute insurance products through a specialised agency force to engage in re-insurance. The agreement, although not binding at the time, was viewed as a positive catalyst for the IPO.
Although PICC P&C reported strong net profits of Rmb15.1 billion ($2.43 billion) in 2014 compared with Rmb10.6 billion in 2013, some analysts are less optimistic about future growth for the Chinese insurer.
“Catastrophe was light in 2014, and this will become a tough base for comparison this year,” read a Citi report dated March 27. “An auto insurance pricing deregulation pilot scheme will start in six provinces/cities this April, and will likely gradually exert pressure on pricing as coverage expands over time.”
Monday’s share sale was likely seen as a welcome respite in Hong Kong, as block trades have been sparse in Asia with many companies in a blackout period during earnings season.
There are signs that activity is picking up ahead of the Easter holidays however. On March 27, US oil company Chevron raised $3.6 billion after offloading its entire stake in Caltex Australia, a petroleum refiner and distributor. And earlier in March, the Korea Deposit Insurance Corporation (KDIC) raised W133.4 billion ($118 million) after completing its long-anticipated 2% stock divestment.
