AIG Prices Massive Secondary Offering, Overwhelming Success

American International Group Inc. (NYSE: AIG) should be considered a huge winner on the U.S. Treasury stake sale. The stock did drop marginally on the news, and the shares are being sold at a slight discount to that drop seen on Monday. Why this is a success is that the demand is high and this was hardly a drop at all when you consider that the offering is so massive.

AIG’s stake sale went off at $32.50 per share for a whopping 553.8 million shares. The Treasury also has granted the underwriters an overallotment option to purchase up to an additional 83.1 million shares to meet any excess demand if the demand is there.

What is helping the success of the issue is that AIG is buying roughly $5 billion in shares based on 153.8 million shares at the offering price. This also takes the U.S. Treasury down to a minority shareholder. The Treasury owns approximately 53.4% of AIG’s common stock outstanding prior to the sale, and it will own approximately 21.5% after the offering. If the overallotment is exercised in full, then the Treasury will own only about 15.9%.

As you would expect in an offering of this size, the underwriting group is huge. Citigroup, Deutsche Bank Securities, Goldman Sachs and J.P. Morgan Securities are the joint global coordinators for the offering. BofA Merrill Lynch, Barclays Capital, Morgan Stanley, RBC Capital Markets, UBS Securities, Wells Fargo Securities and Credit Suisse Securities (USA) are the joint book-runners for the offering.

AIG shares closed at $33.30 on Monday and are indicated around $32.72 so far this morning.

JON C. OGG