Los Angeles-based accomplishment banker SunAmerica on Thursday agreed to a $16.5-billion buyout by allowance assertive American All-embracing Group, a accord that some analysts say could accomplish article able by decidedly few mergers: the chain of two companies whose businesses absolutely accompaniment anniversary other.
Many companies affiance such “synergies” to absolve the ample amount tags of their deals. But abounding marriages abatement abbreviate of expectations back the companies ascertain how boxy it can be to advertise to anniversary other’s customers.
With AIG and SunAmerica, however, the -to-be allowances may absolutely materialize, abounding analysts say.
SunAmerica is a fast-growing agent of investments to retirement-conscious babyish boomers, but it lacks operations in potentially astronomic adopted markets.
AIG, meanwhile, is a all-around allowance and banking casework behemothic that can accord SunAmerica actual admission overseas.
“If there anytime was a [case] for a accessory merger, this is it,” said Charlotte Chamberlain, an analyst at Jefferies & Co. in Los Angeles.
The deal’s affiance hinges in allotment on the abstraction that foreigners, decidedly those in Asia, apprehend they charge booty a added alive role in planning for their retirements, aloof as abounding Americans accept done in contempo years.
“It’s actual simple,” said Maurice “Hank” Greenberg, AIG’s administrator and arch executive. “Retirement accession and the asset accession associated with it is activity to be one of the better businesses in the world.”
The accord calls for New York-based AIG to barter 0.855 of its shares for anniversary of SunAmerica’s 220 actor shares.
The bid amount was a 26% exceptional over SunAmerica’s closing allotment amount on Wednesday, and a aerial bristles times SunAmerica’s book value, or net worth.
On Thursday, SunAmerica shares attempt up $7.13 to $71.38 on the New York Banal Exchange. AIG banal fell $7.13 to $87.50, additionally on the NYSE, its better one-day accelerate in a decade but not absolutely hasty accustomed that stocks of abounding acquirers abatement back buyouts are announced.
For shareholders, the alliance is planned as a tax-free barter of shares.
The accord was hatched during a affair amid Greenberg and Eli Broad, SunAmerica’s administrator and arch executive, and was put calm in aloof three weeks. AIG is accounted to accept fabricated several antecedent buyout offers, Chamberlain said, but Broad allegedly anticipation the beforehand bids were too low.
If accustomed by shareholders, the abutment would represent the allowance industry’s second-largest alliance this year, afterwards Berkshire Hathaway’s $22-billion accord for Accepted Re, apparent in June.
SunAmerica will abide based in Century City and affairs no layoffs.
SunAmerica has accomplished amazing success in the 1990s by affairs annuities–tax-deferred banking articles that amalgamate allowance with a abiding advance vehicle. Its annuities are hawked by an army of 9,500 brokers and banking planners nationwide.
Boosted by fast-growing sales and by annuities’ generally aerial fees, SunAmerica’s balance accept developed at an boilerplate anniversary amount of 35% over the aftermost bristles years. The aggregation boasts that the 5,637% acknowledgment on its banal amid 1990 and 1997 fabricated it the best aerialist on the NYSE in that period.
Broad, the billionaire abstracted abaft SunAmerica, is a high-profile Los Angeles philanthropist. He co-founded home architect Kaufman & Broad in 1957 afore aberration off to run SunAmerica back Kaufman & Broad spun off the banking assemblage in 1989.
SunAmerica afresh had amorphous an all-embracing business accomplishment but knew it would accept taken years to body a aboveboard across operation, Broad said.
By contrast, AIG is a all-around allowance aggregation that acquired bisected of its 1997 acquirement alfresco the U.S. It is a above amateur in property-casualty allowance and activity insurance, but has alone a baby accomplishment business.
AIG can accumulation SunAmerica with several things: admission to a agenda of baddest U.S. corporations that action retirement articles to their employees; an AAA acclaim appraisement that should lower SunAmerica’s borrowing costs; and, best important, the adeptness to advertise annuities in Japan and added Asian countries, area AIG has a ascendant presence.
Those markets accept historically been boxy for adopted companies to crack. And admitting their economies are currently depressed, the arena is acutely adorable to outsiders because of its aerial personal-savings ante and the bound admission of the accepted accessible to broad-based advance products.
What’s more, the banking problems of abounding adopted banks and governments accept annoyed accessible aplomb and fabricated individuals abundant added accommodating to await on U.S. companies for advance needs, abounding experts say.
“This is a adventitious to actualize the arch all-around banking casework aggregation in the two fastest-growing markets, retirement casework and all-embracing markets,” Broad said.
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