The US insurer had to abandon its original plan of selling shares of AIA at a level that would value the company at USD 35 billion-USD 37 billion in order to get Kuwait's sovereign wealth fund on board.
"AIG has been forced to lower its valuation for the Hong Kong IPO offering of AIA to secure a USD 1 billion commitment from the Kuwait Investment Authority (KIA) and other cornerstone investors," the Financial Times reported.
After lengthy negotiations, KIA signed up for the IPO on the condition that AIA would be valued at between USD 30 billion and USD 32 billion, the report said, citing people familiar with the matter.
According to the publication, other big investors, including a number of Hong Kong tycoons, have also signed up for cornerstone stakes. In exchange for getting a fixed amount of the offering, the cornerstone investors' shares will be locked in for a period of six months.
Malaysian sovereign wealth fund Khazanah will also pick up a small stake, the report added. AIG, which is looking to repay the US government for bailing it out of a financial crisis with a USD 182 billion package, plans to sell a 30-50 per cent in AIA through the IPO.
The report said AIA was also talking with institutional investors such as BlackRock and Capital Group over the weekend, seeking to secure big investments early on in the book building process, which begins on Tuesday.
The shares will be priced and allocated on October 21, ahead of the planned listing of AIA on the Hong Kong Exchange on October 29. The decision for a public float of AIA shares in Hong Kong came after a planned USD 35.5 billion sale to UK-based Prudential fell through earlier this summer. Prudential's shareholders rejected the deal as too risky and expensive.
AIG has hired 11 book runners for the IPO to try to secure as much financial backing as possible. Citigroup, Deutsche Bank, Goldman Sachs and Morgan Stanley are leading the deal as joint global coordinators.