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Li Is Back In Game With AIG Purchase
Richard Li sealed a deal over the weekend to pay about US$500 million for part of American International Group Inc.'s asset-management business, a bold new venture for the Hong Kong tycoon after recent high-profile setbacks.
Mr. Li's wholly-owned investment vehicle Pacific Century Group will pay an initial US$300 million in cash on closing for AIG Investments, which manages US$89 billion for retail and institutional clients in 32 countries. Its assets include private-equity funds, hedge funds of funds, listed equities, and fixed income.
Pacific Century Group expects to pay an additional US$200 million to AIG in carried interest and other payments linked to future performance of the business. The Wall Street Journal was the first to report Mr. Li's interest in buying the asset manager in June.
The AIG Investments purchase marks an aggressive move into asset management for Mr. Li, chairman of Hong Kong's biggest telecommunications firm, PCCW Ltd. and the younger son of Li Ka-shing, one of the wealthiest men in Asia. He has other investments in real estate and previously owned a Hong Kong insurance company that had an asset-management arm. Richard Li also owns the Hong Kong Economic Journal, a local Chinese language business paper, and is investing in a real-time business and financial news service focused on Greater China.
A successful revival of the business could provide a much-needed boost to Richard Li's reputation as a deal maker. Repeated past attempts to sell all or part of PCCW to outside investors failed, and then a bid to take the company private in a $2.1 billion buyout collapsed earlier this year after Hong Kong securities regulators successfully argued in court that a shareholder vote approving the deal was rigged. Mr. Li wasn't accused of wrongdoing in the suit.
AIG's asset-management business has been hit by concerns over client withdrawals in the wake of the parent company's government bailout last year, which has prompted efforts to sell off assets to help the insurance giant repay more than US$80 billion owed to the U.S. government.
The agreement with Pacific Century Group caps a drawn-out, difficult auction process.
Pacific Century Group had initially bid for the unit, known as AIG Investments, in March on its own. The group joined a consortium led by U.S. money manager Franklin Templeton in June, according to people familiar with the situation.
The auction took a hit when Franklin Templeton dropped out of exclusive negotiations with AIG in mid-July. But Mr. Li, despite limited asset-management experience, was able to continue the pursuit on his own due to his strong cash position.
'AIG Investments suits our investment philosophy of making long-term investments in quality businesses,' said a Pacific Century Group spokesman. 'We believe we can add value through our network in Asia, and indeed around the world.'
Mr. Li also plans to work with existing management to rebrand the unit in due course and could also bring in other investors into the deal later, according to a person close to Pacific Century Group.
The conclusion of a deal comes after AIG's new chief executive Robert Benmosche has put some divestiture plans on hold since taking over in August. He is hoping a global economic rebound will boost the value of AIG's assets.
Mr. Li was one of several eager suitors to emerge from Asia in the AIG Investments auction. Australia's Macquarie Group Ltd. and Religare Enterprises Ltd. of India joined hands to make a competing offer for the business.
