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Taiwan rejects Hong Kong group’s bid for AIG unit

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Taiwanese authorities on Tuesday rejected a Hong Kong consortium’s bid to buy ailing US insurance giant American International Group’s Taiwan unit Nan Shan Life.

The application by Hong Kong-based China Strategic Holdings and Primus Financial Holdings “has failed to get the approval of the responsible authorities,” the Investment Commission said in a statement.

Rejection of the bid came as a blow to AIG, once the world’s largest insurer, which has been selling assets to pay back US government loans since its rescue from collapse during the 2008 financial crisis.

“AIG is disappointed by the Investment Commission’s decision concerning the sale of Nan Shan…. AIG is conferring with the Primus Nan Shan consortium as to appealing this decision,” the US insurer said in a statement.

The Hong Kong bidder is allowed to file an appeal within 30 days but analysts were not optimistic on the prospects for the deal.

“Even if China Strategic Holdings and Primus Financial Holdings appeal, the odds of success are slim,” said Mars Hsu of Grand Cathay Securities.

Officials with the Financial Supervisory Commission — the regulators that oversee Taiwan’s insurance industry — said the Hong Kong consortium was short of experience to manage an insurer.

They also charged that the consortium had failed to provide a long-term management commitment, allegations flatly rejected by AIG.

“AIG believes that its additional accommodations of regulatory requests, including a seven-year lockup mechanism agreed to by the Primus Nan Shan consortium and a 325 million US dollar escrow agreement agreed to by AIG, demonstrate clear support for … incontrovertible commitment to the long-term health and prosperity of Nan Shan.”

The Hong Kong consortium agreed to acquire Nan Shan Life from AIG for 2.15 billion US dollars in October last year, but the deal has been in limbo since November when China Strategic announced a plan to sell a 30 percent stake in Nan Shan to Taipei-based Chinatrust Financial Holding Co.

Rumors also surfaced late last year that Chinese capital was involved in the deal — claims that the consortium has repeatedly denied.

Fan Liang-tung, executive secretary of the Investment Commission, said:

“The decision has nothing to do with concerns that some shareholders of the consortium have Chinese capital.”

Taiwan has partially lifted a decade-old ban on Chinese investment amid improving ties after President Ma Ying-jeou took office in 2008 on a China-friendly platform.

However, the government still imposes various restrictions in key sectors such as finance, flat-panel technology and telecommunications as it seeks to keep control of its economy.

Nan Shan Life was established in 1963, and now has a network of 24 branches and 450 agency offices, employing a staff of 4,000 and more than 34,000 agents. As of September 2009, it had four million customers.

Taipei, Aug 31, 2010 (AFP)