Taiwanese tycoon Richard Tsai and Chinese financier Xiao Jianhua are in talks to help fund a $4.2 billion bid for American International Group Inc. (AIG:US)’s aircraft-leasing unit, three people with knowledge of the matter said.
Tsai’s family, and companies it controls, would take as much as a majority stake in the group that has agreed to buy International Lease Finance Corp., said two people, who requested anonymity because the details are private. Xiao would mainly be involved in providing financing, one person said.
The involvement of Tsai and Xiao may help the group, which has been led by Hong Kong-based P3 Investments Ltd., bridge a funding gap that’s held up the deal for several months. AIG has sought to sell ILFC since 2008 when it began divesting units to repay a U.S. bailout. Closing the deal, which was announced last year, would help AIG Chief Executive Officer Robert Benmosche cut debt at the New York-based insurer.
The makeup of the group has not been finalized and there are several parties considering taking part in the deal, the people said. Tsai, the son of Taiwan’s second-richest man, is also a limited partner in P3 Investments, two people said. The Committee on Foreign Investment in the U.S. will only approve a sale of ILFC if there is no dominant shareholder in the consortium, one of the people said.
The deal has suffered several missed deadlines by the original group of investors, who agreed last December to pay $4.2 billion for 80 percent of the unit. AIG had previously said it expected the deal to be completed in the second quarter. New China Trust Co. pulled out of the bidding group in May, a person with knowledge of the matter said earlier.
The bidding group is seeking to borrow $2.1 billion from lenders including Taiwan’s Mega International Commercial Bank Co. and Bank of Taiwan for the ILFC purchase, two people said.
Tsai declined to comment on in an e-mail from his office, as did a representative for Xiao and spokesmen for AIG and ILFC.
Xiao said in an interview with 21st Century Business Herald in May that he is interested in participating in the bid for ILFC, citing the potential to profit from an initial public offering of the company immediately after buying it. Fubon Financial (2881) Holding Co. is also interested in the deal, Xiao told the Chinese newspaper at the time. Tsai is vice chairman of Fubon Financial.
Fubon Financial shares gained 2.1 percent as of 2:30 p.m. local time today, the biggest increase since Oct. 3.
The insurer said in 2011 that it could cut its stake through an initial public offering, and CEO Benmosche said as recently as Nov. 1 that AIG can pursue an IPO to divest ILFC if the China deal collapses.
ILFC took the third-quarter impairment charge after determining that four-engine jets in its fleet, such as the Airbus A340-600, have fallen out of favor as airlines turn to more fuel-efficient twin-engine planes. The impairment had no effect on AIG’s results because the company booked a loss on plans to sell the unit that was recognized last year.
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