Macquarie To Bid For AIG Investments

Post by Sharat on May 11, 2009 · Under Australian Economy, Capital Markets, Company News, International Business News, Mergers & Acquistions, banking · Comment

Domestic investment banking major, Macquarie Group is rumoured to be finalising a bid for the fund management unit of troubled US insurance giant AIG, as the insurer considers divestment of strategic assets to pay back some of the federal funding it has received to stay afloat.

The report which first emerged over the weekend and reported by multiple news agencies suggests that the investment banking group is keen on acquiring AIG investments, which is the institutional asset management unit of AIG and currently manages more than US$100 billion in assets.

Larger rivals from the US and Europe have also expressed interest in acquiring the business and it is thought that Macquarie believes itself to be the underdog in the bidding process, with an outside chance.

If however Macquarie successfully acquires the business, the group intends to position it alongside and into its Macquarie Fund Management unit, which like most other managers has had a hard time of the last year as asset prices feel considerably and asset markets globally were rocked due to the global banking crisis.

AIG investments has been determined to be a non core asset of the trouble insurance giant after it was forced to take US$85 billion in government bailout money, effectively nationalizing it. Market speculation suggests the asset could fetch US$500 million from its sale and such a sale would be run as an auction.

Macquarie Group has the ability to pay such a price, having raised A$1.2 billion in fresh equity only last week and carrying A$4.3 billion in surplus capital on its balance sheet.

Macquarie was keen to dampen the speculation that its capital raising was designed to fund a bid as reports began to emerge on Friday that it was interested in acquiring the business, and according to The Australian, many insiders believe that it has only an outside chance of succeeding. However, the bank’s position in already having the funding in place is expected to be a positive in Macquarie’s pitch for the deal.

The AIG unit manages institutional money invested in direct equities and hedge funds and a successful acquisition would more than triple the valuation of Macquarie Funds or its assets under management.

Macquarie’s fund management business currently manages A$49.7 billion of assets, which rose just 5 per cent from $47.3 billion in the previous financial year.

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