MetLife raises $3.15 billion for purchase of AIG unit
MetLife Inc., the largest U.S. life insurer, raised $3.15 billion by selling shares below yesterday's closing price to help pay for the acquisition of an American International Group Inc. business unit.
MetLife said it sold 75 million shares at $42 each, compared with yesterday's closing price of $42.73. MetLife, based in New York, closed at $38.92 on March 5, the last day of trading before the announcement of the $15.5 billion deal to purchase AIG's American Life Insurance Co. The insurer originally planned to sell $2 billion of shares to help fund the acquisition.
Chief Executive Officer Robert Henrikson is expanding MetLife in nations including Japan and Poland. Locally, MetLife has operations in Aurora and Downers Grove. Standard & Poor's said yesterday in a note it plans to resolve a negative credit watch on MetLife once the company completes the stock sale and a planned debt offering of about $3 billion.
"The key here was the increase in the size of the equity raise," said Randy Binner, an Arlington, Virginia-based analyst for FBR Capital Markets. "Instead of paying out of cash on hand, they're going to investors to raise that extra cash. That's the kind of thing that makes ratings agencies like S&P happy."
MetLife announced yesterday that it had reduced its forecast for next year's operating earnings because of the larger share sale. The acquisition may add 40 cents to 45 cents per share to earnings compared with a projection of 45 cents to 55 cents in March.
AIG BailoutAIG is selling assets to help repay a government bailout valued at $182.3 billion. MetLife has said it may complete the unit acquisition in the fourth quarter. Prudential Plc's deal to buy AIG's main Asia business collapsed this year after the London-based insurer's investors balked at the $35.5 billion price.The proceeds from MetLife's stock and bond sales will go toward the $6.8 billion cash portion of the purchase of AIG's Alico unit. MetLife plans to sell $3 billion of senior notes in a three-part offering as soon as today, according to a person familiar with the transaction, who declined to be identified because terms aren't set. MetLife said it will use funds on hand for the remainder of the cash portion.MetLife plans to issue notes due in 2014, 2021 and 2041, the company said today in a regulatory filing.MetLife sold stock in October 2008, raising $2.3 billion at $26.50 a share as profit declined amid falling equity markets. Losses accumulated from stakes in failed companies including Lehman Brothers Holdings Inc. and Washington Mutual Inc. and as hedge-fund and private-equity returns performed worse than expected.Bank of America Corp., Deutsche Bank AG, HSBC Holdings Plc, Wells Fargo Co., Credit Suisse Group AG and UBS AG managed yesterday's stock sale.