LONDON - US insurer AIG has been forced to reduce its valuation for the Hong Kong initial public offering of its Asian unit AIA to win the commitment of Kuwait's sovereign wealth fund, a report said Monday.
AIG had to drop its initial plan to sell shares in AIA at a level that would value the company at $35 billion to $37 billion (25.4-26.9 billion euros) to secure the backing of the Kuwait Investment Authority, the Financial Times said.
The fund signed up to the IPO based on AIA being valued at between $30 billion and $32 billion, said the FT, citing people familiar with the matter.
The Wall Street Journal cited a person familiar with the deal as saying that the firm could be valued at up to 30.5 billion dollars for the offering, details of which are expected to be officially announced Tuesday.
AIA was forced to lower the valuation to secure a one-billion-dollar commitment from the Kuwait fund and other cornerstone investors, said the paper.
A number of Hong Kong tycoons are among other big investors to have signed up for cornerstone stakes, according to the FT.
AIG, which owes billions of dollars in US government bailouts, plans to sell 30% to 50% of its Asian unit in the offering but has still not decided exactly how much and at what price, said the FT.
AIA was talking to institutional investors such as BlackRock and Capital Group over the weekend to try and secure major investments, according to the report.
Last month, the insurer won approval for a Hong Kong share sale of its Asian unit in what could be the world's second-biggest initial public offering this year, Dow Jones Newswires reported.
An investor roadshow starts this week and the shares will be priced on October 21. AIA is expected to list on October 29, according to Dow Jones Newswires.
AIG was forced to look again at the option of publicly floating AIA in Hong Kong after the collapse in June of Prudential's 35.5-billion US dollar takeover bid.
Agricultural Bank of China claimed the world's biggest IPO in August when it confirmed it had raised $22.1 billion, after its shares debuted in Hong Kong in July.