Chinese investors buy 80pc of AIG plane unit for US$4.2b

A Chinese group agreed to buy 80.1 per cent of American International Group’s plane-leasing unit for US$4.23 billion in the nation’s largest acquisition of a US company.

The International Lease Finance Corporation acquirers, led by New China Trust Chairman Weng Xianding, have an option to buy another 9.9 per cent, New York-based AIG said today in a statement. The transaction, which values ILFC at US$5.3 billion, passes China Investment Corporations’ US$3 billion purchase of a stake in Blackstone Group in 2007 as the biggest Chinese-US deal.

The acquisition gives the group control of the world’s second-largest aircraft lessor as rising travel in China and Asia spurs demand for planes. AIG, which counts the US government as its largest investor, is selling Los Angeles-based ILFC as Chief Executive Officer Robert Benmosche focuses on insurance operations and works to reduce debt.

“AIG has made a strategic decision to be really an insurance company,” Paul Newsome, an analyst at Sandler O’Neill & Partners, said in an interview before the deal was announced. “Most investors in AIG and potential investors in AIG would like to see AIG be a simpler company.”

AIG will record a US$4.4 billion non-operating loss, which includes a US$1.8 billion non-cash charge tied to tax assets, when the transaction meets criteria for “held for sale” accounting treatment, according to the statement. The deal is subject to approval by US and Chinese regulators.

The group investing in ILFC includes New China Trust, China Aviation Industrial Fund and P3 Investments, AIG said. China Life Insurance and a unit of ICBC International Holdings, the investment banking arm of the world’s biggest bank, may also join once the deal is approved by regulators and the option to buy a further stake is exercised, it said.