Barron's Cavendish Trust previously acquired the British Friendship Group for $2.85 billion. Even with the subsequent injection of restructuring funds, the total was only around $3 billion.
Meanwhile, AIA's value exceeded $20 billion—even after the subprime mortgage crisis, which had impacted the overall market value of companies.
The main reason for the American International Group's current predicament was that its financial division was overly involved in subprime securities insurance, while its other businesses were not significantly affected. This was one of the main reasons why the US government ultimately agreed to bail it out.
To the outside world, merging AIA through Friendship Insurance Group would appear to be a case of "a snake swallowing an elephant"...
"Your Highness, we do consider selling some assets, but we're only currently considering selling 49% of AIA to bring in new investors..."
Next, when Barron met with Edward Liddy, Chairman and CEO of American International Group, he stated,
"We have a number of companies interested, including China Life and Prudential plc, who are looking to discuss this."
"If I were you, I wouldn't make such a choice, Mr. Liddy,"
Barron said, shaking his head.
"Why?"
Although Edward didn't think Barron's words were unusual given his position, he still asked with a hint of curiosity.
"What America International Group needs most now is money and time. Among these, time is the priority, so that your losses in CDS will not cause too many chain reactions and accumulate."
Edward had to agree with what Barron said. He heard the British Duke in front of him continue:
"If the U.S. government could directly take out more than 150 billion U.S. dollars to rescue AIG in the beginning, I am afraid your situation would have been under control, but the key is that this decision could not have been made a few months ago. In the end, only the first $85 billion rescue could be carried out. This is like a tactic of adding fuel to the fire, and it cannot decisively solve the problem."
"It seems so now, Your Highness, but the situation at that time..."
It is true that what Barron said is the right approach, but things can only be seen clearly after the dust settles. As for four or five months ago...not to mention that America International Group itself did not know how big a hole they were in. Even if it really knew, how could it dare to report it truthfully?
If the US government had known at the time that a successful bailout would require over $150 billion, perhaps even closer to $200 billion, then even if AIG's bankruptcy would have caused a much greater chain reaction, their decision to rescue the company wouldn't have been so easy.
"Yes, there's no point in saying this now, but at least there are things we can do. You and I both know, sir, that AIG can't keep all of its businesses. We'll have to make some trade-offs. AIA is not only more valuable, but its primary business is in Asia, making it the most suitable option to exchange for precious funds..."
"Even if selling AIA is an option, Your Highness, as you've said, time and money are what we need. Therefore, at this point, we also need a sincere offer."
Edward Liddy made it clear that, ultimately, they'd still have to decide based on the offer!
...
"We have communicated with the staff of the Ministry of Finance today, Your Highness, they welcome our acquisition, and the relevant regulatory agencies will not conduct overly strict reviews on it..."
Barron agreed with Amber Sheehan's words. After all, in the current situation, whether it is for the consideration of stabilizing American finance or the struggle of the Democratic Party for the election situation, this kind of acquisition that can help American International Group to save itself will be treated specially. Furthermore, as they are British capital, they are not a target for rigorous scrutiny.
After arriving in New York, Barron moved into his estate on Long Island, a place he found more appealing than his Manhattan penthouse.
Amber Sheehan had already arrived from London to personally oversee the acquisition of AIA—a deal destined to become the world's largest insurance merger this year.
Currently, AIA Group appears to be in a relatively advantageous position in its pursuit of AIA. Its two largest competitors are China Life Insurance and Prudential, another leading British insurer.
However, China Life intends to purchase only a portion of AIA's shares. A full acquisition would undoubtedly face strict scrutiny from US authorities, potentially leading to a repeat of the failures of PetroChina's acquisition of Unocal.
As for Prudential...
they already have a substantial presence in Asia. With nearly a century of experience in the Asian market, they currently have over 20 million customers and over $60 billion in assets across 13 markets in the region, making them one of the largest foreign insurance companies in Asia.
Last year, Asian operations accounted for one-third of Prudential's global sales and half of its profits.
This explains their interest in acquiring AIA, and perhaps even acquiring it.
According to analysis by the think tank led by Baron, if Prudential completes its acquisition of AIA, 80% to 90% of Prudential's future sales and profits will come from the Asian market, giving Prudential a dominant position in the region.
In Baron's previous life, Prudential had previously attempted to acquire AIA, but the acquisition ultimately fell through.
After all, a merger of this magnitude, involving two insurance companies of such size, would inevitably face scrutiny from regulators across Asia, including those in the European Union and the United States.
Furthermore, AIA would also consider whether the acquisition would conflict with Prudential's existing businesses.
So, given the current size of the Friendship Insurance Group and the significant disparity in its Asian presence compared to AIA, it's actually in a better position to win this merger. After all,
time is crucial for AIG, and even if regulatory review is approved, the time required will increase as the size and market share of both parties increase.
AIG might not have the patience to wait any longer.
Furthermore, on the American government side, it's not just Barron's side. After hiring JPMorgan Chase to handle the acquisition of AIA, AIG's subsidiary, Jamie Dimon also leveraged JPMorgan Chase's connections to help facilitate the deal...