Thursday, May 7, 2009

Macquarie Said to Bid for AIG Unit in Strategy Shift

Macquarie Group Ltd., Australia’s biggest investment bank, is bidding for an American International Group Inc. fund unit with about $100 billion under management, said two people with the knowledge of the matter.

AIG expects to sell the unit for as much as $500 million, one of the people said, speaking on condition of anonymity because the talks are private. Macquarie is among several firms pursuing AIG Investments, a New York-based fund manager put up for sale in January, the people said.

Macquarie last week raised A$540 million ($407 million) in a stock sale and would more than triple assets under management at its fund division with a successful bid. Chief Executive Officer Nicholas Moore is shifting focus from infrastructure investments to businesses such as managing stocks and bonds for clients after a 16-year run of rising profits was snuffed out by writedowns.

“It would make sense,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney, including Macquarie shares. “The business model of Macquarie is going to be more orientated toward transactional-type management rather than recycling assets as they have done in the past because the structure of the market has changed.”

Macquarie slipped 0.5 percent to A$35.03 in Sydney trading at 11:35 a.m. The stock has more than doubled since slumping to a decade-low on March 3.

Forced Seller

AIG Investments, run by Win Neuger, has 46 offices from Atlanta to Zurich and manages money for institutions, pension funds and wealthy individuals in stock, bond, private equity and hedge funds, according to the company’s Web site.

AIG, once the world’s largest insurer, is selling assets to raise cash after its near collapse led to four U.S. government rescues worth $182.5 billion in all.

“AIG is a forced seller, so it could be quite attractive from a valuation point of view,” Xiradis said.

The insurer received about a half-dozen bids in all for the unit, including from private equity firms and rival asset managers, the Wall Street Journal reported on April 7, citing unidentified sources.

Macquarie spokeswoman Fiona Tyndall and AIG spokesman Peter Tulupman declined to comment.

‘Global Scale’

Macquarie’s Funds Group manages A$49.7 billion in assets, the company said May 1. The unit’s earnings plunged 85 percent from a year earlier to A$45 million on higher expenses, writedowns and impairments.

The Funds Group “will use Macquarie’s strong capital position to seek to gain global scale through acquisitions,” the company said in a May 1 investor presentation.

Macquarie on May 1 sold 20 million shares to raise A$540 million and announced a stock purchase plan for ordinary shareholders, which may raise as much as A$200 million according to a person with knowledge of the sale.

Following the share sales, which come two months after the company said it didn’t need to raise capital, Macquarie will have A$4.1 billion to spare above its regulatory minimum.

“What we have always done is raised capital ahead of needing the capital,” Moore said in an interview on May 1. “Whether it is because of uncertain markets or opportunities coming from the markets, we always want to make sure we are in a very strong capital position.”

New Direction

Macquarie reported a 64 percent slump in second-half profit on May 1 as full-year writedowns totaled A$2.5 billion.

Moore has been distancing the company from the listed infrastructure funds which made up the bulk of writedowns since he took over as CEO a year ago. Macquarie will seek to capitalize on competitor weaknesses to increase market share and may make acquisitions of specialized asset managers, Credit Suisse Group AG analysts wrote in a research note dated May 4.