American International Group (AIG) has made a second attempt to sell its Taiwan business, Nan Shan Life Insurance, signing a deal for $2.16 billion with local investment company Ruen Chen.
Nan Shan is the largest life insurer in Taiwan by book value and the third largest by total premiums. It was set up in 1963 and currently serves 4 million policyholders via a network of 24 branches, 500 agency offices, approximately 4,100 employees, and more than 33,000 agents.
Ruen Chen is an investment holding company owned by Taiwan-based conglomerate Ruentex Group and 20% by Pou Chen. It will acquire AIG's entire 97.57% interest in Nan Shan.
The Ruentex Group was established by the Yin family in 1943 and has grown to become one of the largest conglomerates in Taiwan. It operates across the food retail, property development, construction, real estate, textiles, medical services and finance industries with a turnover in calendar 2009 of NT$310 billion ($10.7 billion).
Pou Chen was established by Taiwan’s Tsai family in1969 and has been listed on the Taiwan Stock Exchange since 1990. It is a manufacturer and retailer of branded athletic and casual footwear for brands such as Nike and Adidas.
The deal announced yesterday is still subject to regulatory approvals, including from Taiwan's Financial Supervisory Commission, and these are by no means a given. AIG initially ran an auction for Nan Shan and in October 2009 a consortium led by private equity firm Primus Financial emerged as the winner with a bid of $2.15 billion. However, that deal was plagued from the outset with allegations that Primus was backed by Chinese money.
Shortly after Primus was declared the winner, the private equity firm struck a deal to sell 30% of Nan Shan to Taipei-based financial services group Chinatrust Financial Holding as it sought to involve a local partner. Then in June last year Primus and AIG amended the share purchase agreement to provide additional support for Nan Shan's capital ratio in an attempt to win over the FSC. However, in August last year the FSC rejected the offer from the Primus-led consortium.
“The participants in the consortium enjoy an excellent reputation in Taiwan,” Robert Benmosche, AIG president and chief executive officer, said in a written statement yesterday as the company announced the new deal. “Ruen Chen offers strong operational and funding capabilities and possesses a clear ability to satisfy the strict criteria that governed AIG’s bid review process.”
The FSC had earlier said that a successful bidder for Nan Shan would need to meet five criteria: future fundraising ability; a long-term commitment to run Nan Shan; insurance industry expertise; a promise to care for Nan Shan employees and policyholders; and legal, non-mainland Chinese funding sources.
“Ruen Chen considers Nan Shan to be a valuable company for long-term investment,” a release issued by the Taiwanese company said. Ruen Chen also went on to affirm its local ownership, an intention of being a long-term investor in Nan Shan and a plan to keep and grow the Nan Shan brand name. Ruen Chen also committed to keep salaries and commissions for Nan Shan’s employees intact for a minimum period of two years after the deal closes.
In a press conference in Taipei yesterday, the chairman of the Ruentex group of companies, Samuel Yin, said the consortium will raise bank financing for around half the bid amount and finance the rest through cash.
Other bidders reported to have been interested in Nan Shan include Cathay Financial, Chinatrust Financial, Fubon Financial and a new Primus consortium including Taiwan Secom.
Citi advised Ruen Chen with legal advice from Freshfields and Baker McKenzie. AIG has been advised on the disposals by Blackstone and Morgan Stanley with Debevoise & Plimpton and Lee & Li as legal advisers.
