The U.S Treasury department has announced on Friday that it plans to raise $5bn by selling American International Group (NYSE:AIG) stocks thereby reducing its stake in the insurer from 61% to 55%. The government is aiming to reap $300mn in profits from a price tag of $30.50 per share, at an approximate $1.78 profit per share.
The business’s shares increased by 1.62% on Friday to close at $31.34.
The sale comes just months before the presidential election, when the US President Barack Obama needed to justify using tax payers’ money to bail out the insurer. Interestingly, AIG received massive $182.3 billion bailouts under both, Obama and Bush administration.
The treasury has already made three successful offerings of AIG stocks at above the breakeven price. The current offer includes 163.9 million shares is expected to close within a week. Once the sale is complete, the treasury will be left with $25bn outstanding investment in AIG.
The government needed to sell the shares above $28.72 per share on an average to earn any profit. The three previous offerings were made for $29, then again for $29 and finally for $30 per share.
It is also learned that AIG will buy back $3bn out of the $5bn offering.
AIG is expected to receive “systemically important” label from the US council of regulators as it is still not overseen by a single regulator. Once the label is applied, AIG will receive supervision directly from Federal Reserve.
The current offering was led by Bank of America (NYSE:BAC)., Barclays (NYSE:BCS), Citigroup (NYSE:C), Credit Suisse Group AG (NYSE:CS), Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Macquarie Group Ltd., Morgan Stanley, UBS AG and Wells Fargo & Co.
AIG Profits Increases by 27%
On 2nd August, the company posted $2.3 billion profits in Q2 2012, thereby showing an impressive increase in profits by 27%. The book value (difference between assets and liabilities) has also improved in Q2 to $60.58 per share from $57.68 reported in Q1. The business’s $1.9bn operating income has beaten the Wall Street’s estimates.
Chief Executive Robert Benmosche has said in a conference call that AIG aims to achieve 10% Return-on-Equity by 2015, reduce costs, invest $30 billion in share buybacks, acquisitions and other activities.
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Treasury plans to sell AIG stock worth $5 billion [Huffington Post]
Treasury to sell more AIG shares [CNN Money]
Treasury says to raise $5 billion from AIG stock sale [Chicago Tribune]