Greenberg Cuts AIG Stake, Facilitating Possible Bid for Units
By Hugh Son
Sept. 26 (Bloomberg) -- Maurice ``Hank'' Greenberg, ex-chief executive officer of American International Group Inc., cut his stake in the firm to just below 10 percent, a move that may make it easier for him to bid for parts of the insurer.
Greenberg, 83, sold 35 million shares of the New York-based company held by Starr International Co. and 5 million of his personal holdings, he said yesterday in filings. Greenberg still controls the largest privately held block of AIG.
AIG, taken over by the U.S. last week, plans to sell businesses to repay an $85 billion government credit line. Greenberg, who said Sept. 16 he was considering buying AIG units, may face less scrutiny from the New York Insurance Department with a stake of under 10 percent, said David Neustadt, spokesman for Superintendent Eric Dinallo.
Greenberg is ``far from throwing in the towel,'' said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. ``He wants the ability to continue maneuvering.''
Greenberg won't have to make as many Securities and Exchange Commission filings because he's no longer a ``controlling entity'' to that regulator, said Phan.
AIG fell one cent to $3.01 at 12:45 p.m. in New York Stock Exchange composite trading. The company's shares have plunged more than 90 percent this year.
Perella Weinberg
Greenberg hired Perella Weinberg Partners LP as financial advisers and may try to buy AIG assets or take control of the firm, he said Sept. 16. Greenberg is also part of efforts to raise capital to prevent the dilution of AIG investors in the U.S. takeover.
Dinallo's office has reprimanded Greenberg in the past for attempting to shake up AIG management. Investors with more than 10 percent of an insurer's stock are considered a ``controlling person'' under state law, and must seek approval for actions that affect the companies.
Dinallo told Greenberg in a Dec. 7 letter to ``cease and desist immediately from engaging in any further activities aimed at exercising a controlling influence'' over AIG. Then, Greenberg controlled about 12 percent of the shares through personal holdings and investment firms.
AIG averted collapse last week by agreeing to turn over 79.9 percent of the company in exchange for the loan. Greenberg was among investors who met Sept. 22 to discuss raising money to reduce federal involvement. AIG said the next day it signed a deal for an $85 billion Federal Reserve credit line, reducing the options left for shareholders. The insurer had drawn down $44.6 billion, the Federal Reserve said yesterday.
Private Sector Solutions
Greenberg still supports efforts to reduce the government dilution of AIG stakeholders, said his lawyer, David Boies. The attorney said ``there is no doubt'' the loan agreement makes ``a private sector solution significantly more difficult.''
``If the company were to say, `We're prepared to cooperate with shareholders and others,' then the government certainly ought to welcome that, it would be good for taxpayers,'' Boies said yesterday in an interview.
Dinallo hired private-equity firm Centerview Partners to make sure divestitures ``result in the best for the policyholders of the companies being sold, that the companies are bought by solid buyers and that the deals stick,'' Neustadt said.
Starr International, a firm run by Greenberg, sold 35 million AIG shares at $3.06 each, the company said yesterday in a filing. Greenberg sold shares for about $3.77 apiece. Glen Rochkind, a spokesman for Greenberg, declined to comment.
Housing Slump
Greenberg was CEO for almost 40 years until 2005. The value of the stake he controls declined by more than $5 billion this month as the insurer was overwhelmed by losses tied to the U.S. housing market.
Edward Liddy, who replaced Robert Willumstad as CEO after the U.S. investment, said in a Sept. 24 statement he'll unveil his strategic plans for the insurer on Oct. 3. Liddy has told staff he must ``quickly come to terms'' with which units he'll sell to repay the lifeline from the Federal Reserve.
AIG may get $115 billion by selling all its units, Credit Suisse Group AG analyst Thomas Gallagher said in a Sept. 23 note. The company may need to sell more than half its businesses to repay the debt, he said.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
Last Updated: September 26, 2008 13:06 EDT
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