China fund in talks to acquire AIG's Alico

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American International Group, Inc

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4:03pm 11/20/2008
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AIG 1.44, -0.12, -7.7%) is holding preferential talks with the CIC-led consortium, which also includes Chinese insurance companies, with the end of the year as their set deadline, Japanese business daily Nikkei said on its Web site in a report dated Friday.

If the parties are unable to agree on details, the negotiations could end without a deal, Nikkei said, citing sources familiar with the matter.

Alico has operations in more than 55 countries. Citing Alico's future growth potential, AIG is said to be considering a sale on the condition that it will keep more than 50% of voting rights in the firm, thereby allowing it to maintain management control, the report said.

Based on Alico's business value, the acquisition of a 49% stake by the Chinese investors would likely cost the Chinese camp around 500 billion yen ($5.1 billion) to 1 trillion yen.

Alico Japan, a branch of U.S. firm Alico, accounts for 60 to 70% of the company's entire insurance premium revenue. If the CIC consortium invests in Alico, this will give China an effective entry into the Japanese insurance market. Alico Japan's insurance policies are expected to be maintained in principle even in the event of an acquisition of shares by the Chinese investors, the Nikkei report said.

AIG said in October it would sell Japanese subsidiaries AIG Edison Life Insurance Co. and AIG Star Life Insurance Co. along with Alico Japan.

Initially, the sale of the three firms had been expected to spark an intense bidding war among domestic and overseas insurance companies. But major Japanese insurers expressed caution about acquiring the units, because plunging Japanese share prices have hurt their own financial situations.