American International Group Inc. (AIG) reported that a wholly-owned Taiwan subsidiary has reached an agreement with Central Insurance Co., Ltd (Central Insurance) to acquire all of Central Insurance’s outstanding shares by means of a statutory share swap.
The purchase value of the transaction is estimated to be between NT$5.92 billion and NT$6.05 billion.
In addition, the Taiwan subsidiary, AIG Direct Marketing Co., Ltd (AIGDMC) and one of Central Insurance’s major shareholders, Polaris Securities Co. Ltd, are expected to enter into a cooperation agreement, which will become effective on the closing of the share swap transaction. Under this agreement, Polaris and AIGDMC will develop plans to distribute Central Insurance’s products in the Taiwan market.
With this acquisition, AIG is reportedly bringing together some of Taiwan’s strongest capabilities in general insurance product development, management and distribution. AIG established a branch of AIU Insurance Company in Taiwan (AIU Taiwan) in 1982. Since then, AIU Taiwan has reportedly been at the forefront of bringing general insurance solutions as well as a wide range of professional liability insurance to the local market. Central Insurance, founded in 1962, is a domestic general insurer, ranked sixth in Taiwan, with more than NT$7 billion in gross written premiums and more than 900 employees.
Under the share swap agreement, the current shareholders of Central Insurance will receive redeemable preferred shares of AIG Direct Marketing Co., Ltd (AIGDMC) in exchange for each common share of Central Insurance. The effectiveness of the share swap is subject to the approval of Central Insurance’s shareholders and regulatory approvals, and is expected to take place during the third quarter of 2006.
The preferred shares of AIGDMC will have a liquidation value of NT$10 per share. The exchange ratio will begin at 1.7 preferred shares for every common share, but will increase daily at a rate of 2.5% per annum if the acquisition is not completed within 30 days after the shareholders of Central Insurance approve the transaction. The preferred shares will be redeemed within six months after issuance, at their liquidation value, plus accreted value at a rate of 2.5% per annum from the date of their issuance.
Topics AIG
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