AIG now pursuing sales as breakup pressure mounts

The insurance conglomerate says its approach will land somewhere between using “nail clippers” and a “machete,” according to one report

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Faced with mounting pressure from investors to break up the conglomerate, American International Group revealed  in a company meeting late last week that it is now “actively pursuing at least one sale” of a business unit and is open to “pruning” the company further – though not with any large-scale sales that would significantly shrink its holdings.

That’s according to Sanford C. Bernstein analyst Josh Stirling, who attended the meeting with AIG Chief Executive Peter Hancock and shared his insights with the Wall Street Journal.

Stirling said a key takeaway of the meeting – the second of its kind in recent days – is that AIG is open to “pursuing sales of various non-core assets” as a way to narrow its focus, but that such divestitures will take place “over time.” Specifically, Hancock and Chief Financial Officer David Herzog described their approach as falling somewhere between taking “nail clippers” and a “machete” to the company.

“[AIG is seeking] a middle ground and measured approach,” Stirling told the Journal.

The comments come as AIG investors pressure leadership to break up the company on the heels of a $231 million net loss in the third quarter. Stirling himself has been among the critics, telling Bloomberg Business that AIG does not necessarily deserve to exist in its current form.

“It was built as a conglomerate, it has been run as a conglomerate. The obvious solution for this firm is to ‘de-conglomerize’ itself and to de-SIFI…and divest a lot of the business,” he said.

AIG has resisted these calls, saying it will not consider selling unless the right offer is made. It has not previously been seeking such offers, however.
Since the meeting, some investors have sought to take even more drastic measures. Billionaire investor Carl Icahn went so far as to propose a shakeup to leadership at AIG Monday, hoping to replace Hancock as CEO by communicating directly with the company board.

“In all of our discussions with Mr. Hancock it was abundantly clear to us that he is not willing to take the bold steps that we, and so many other shareholders, believe are long overdue,” Icahn said. “He failed to lay out any alternative strategic plan with the potential to unlock value for shareholders or to provide compelling reasons as to why these businesses belong together.”

Icahn’s firm has more than 42 million shares of AIG, giving him a 3.4 percent stake, according to a regulatory filing Monday. That would make him the fifth-largest investor in the company, according to data compiled by Bloomberg.
 
 

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