Ayala, Sy groups submit bids for Philamlife

The Philippine Star

Posted at Feb 26 2009 10:33 AM | Updated as of Feb 26 2009 06:33 PM

Two of the country’s richest families are bidding for ownership and control of Philippine American Life and General Insurance Co. (Philamlife) and its subsidiaries, the prized Philippine assets of financially-troubled US insurer American International Group (AIG).

Sources said Banco de Oro Unibank (BDO), the main banking arm of the Sy family’s SM Group, in partnership with Italy’s Assicurazioni Generali SpA, along with the tandem of the Ayalas and Prudential Life of the UK, have submitted their formal offers to beat the final deadline yesterday, which was actually extended from the original Feb. 23 deadline.

The same sources, however, could not confirm whether Canadian insurance giant Manulife Financial – the only other bidder in the running – made the deadline or had backed out from the auction.

The actual bid offers were not disclosed but the sources indicated they were all “within the range” of the reported P36-billion asking price of AIG.

“They need to make a decision quickly as AIG is once more asking for more bailouts from the US government,” a source said. AIG has been given until the middle of March to sell Philamlife and some of its subsidiaries.

In a related development, AIG, facing massive losses and seeking fresh funds, may be willing to give up control of its prized Asian division, worth about $20 billion, said sources with direct knowledge of the matter.

Advisers have signaled the embattled US insurer would consider a bid for a majority stake in American International Assurance Co. Ltd (AIA), should buyers submit a compelling offer, the sources said.

That would mark a significant shift for AIG, which had been determined to cap the stake sale of its Hong Kong-based subsidiary at 49 percent.

AIG’s majority grip on AIA is coming under increasing pressure for several reasons, sources said.

For starters, AIG’s financial situation only appears to be getting worse, a view backed by reports the company faces a massive quarterly loss and is seeking a third round of US government aid.

The prevailing argument among possible AIA suitors is that any company willing to spend around $10 billion in this brutal environment will want control, said the sources, who did not want to be named because they were not authorized to speak on the record about the process.

First round bids for AIA are due this week, the sources added.

“This is a once in a life time opportunity,” a source said. “AIA is regarded as AIG’s crown jewel.”

The plans to sell up to 49 percent of AIA were put in place last fall, shortly after the US government saved AIG from bankruptcy in September with a rescue that has since ballooned to around $150 billion.

Several other insurers across the globe have been mentioned as interested, including Chinese buyers, though doubts remain if they would get support from Beijing.

Private equity firms and sovereign wealth funds could also team up or partner with a bidder, sources said.

With AIG focused on raising as much as possible from its Asian operations, smaller auctions for various AIA units across the region are off the table, the sources said.

But the lucrative sale of a majority stake is not. AIG was hesitant to give up control of AIA early on, but not now, according to the sources.

As in any auction, suitors could drop out or the seller could to decide to cancel or postpone the process.

AIA has more than 2 million policies in force, according to its website, with branches and affiliates in most major countries throughout Asia outside of Japan. It has 3,800 financial services consultants and 800 staff.