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Rating:AIG Bears Down on Liberty Sale Not Rated 3.0 Email Routing List Email & Route  Print Print
Friday, April 06, 2001

AIG Bears Down on Liberty Sale

Reported by Alfred Wang

Talk of an immenint deal for Liberty Financial has grown louder in the wake of AIG's surprise bid for American General on Tuesday. Further, the names of at least three suitors are on peoples' lips. The dark horse in the bidding is First Union, while the two favorites are both insurers (John Hancock and the U.K.'s Prudential PLC). But first, why is the bidding war for American General relevent to Liberty's auction?

Both American General and Prudential PLC had been eyeing Liberty, but each took itself out of the bidding earlier this year when they announced their deal in mid-March.

Now Prudential is rumored to have stepped back into the competition as the newest (and oldest) contender for Liberty. Afterall, AIG's offer for American General has greatly decreased the likelihood that it will complete its own proposed American General merger.

Even more, if Prudential fails to complete the merger, it will receive a $600 million break-up fee from American General. That cash could, in turn, help propel a deal for Liberty, speculated Banc of America Securities analyst Rob Ryan in a recent report. The chief executive officer of Britain's second biggest life insurer told Reuters that Prudential would investigate other options.

"If for some reason the deal with (American General) didn't happen, we would look at a range of options which would include other things in the U.S.," said Jonathan Bloomer, chief executive officer of Prudential.

John Hancock is another possible bidder for Liberty. The Boston-based insurer would find synergies in Liberty's annuity business and it is known to be on the prowl for assets, according to John Hall, an analyst at Prudential Securities.

If no deal occurs between either Prudential or Hancock, dividing and selling Liberty by its insurance and asset management divisions increases in probability.

In this scenario, a third suitor -- First Union -- is rumored. Some analysts have concluded that the bank, headquartered in Charlotte, North Carolina has no interest in becoming an insurer, which would mean that it would only be interested in the insurer's straight asset management business.

Banc of America's Ryan expects Liberty to announce an agreement within weeks. Liberty Mutual, the parent company, is moving quickly to monetize its holdings, in spite of the unexpectedly long time frame of the sale to date.

"An auction could easily be conducted in three to four month period, and obviously we've moved beyond that," Hall told the MutualFundWire.com. "That's a long period of time for us to be in the dark about who carries the day.

The tech wreck on the Nasdaq and the recent downturn on the Dow have had little impact on Liberty's asset management business, say analysts, since the bulk of its assets are in fixed income. 

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