AIG, Others to Acquire 3 Hyundai Affiliates

An American International Group Inc.-led consortium agreed to buy three affiliates of Hyundai Group for $856 million, the biggest foreign investment in South Korea’s financial industry, said U.S. investor Wilbur Ross, one of the buyers.

The purchasers--including AIG, the biggest insurer; California Public Employees Retirement System, the largest U.S. public pension fund; and GE Capital Corp., the top non-bank finance company--will gain access to 250 outlets in Asia’s third-biggest economy.

The pact includes a $706.4 million infusion by the government for Hyundai Investment Trust Management Co., one of the companies being bought, and wraps up 14 months of talks.

Though Korea has slumped to its slowest growth since 1998, the 2.7% annual expansion is faster than in the U.S. and Europe.

“Korea is an important Asian market and this is a great idea to get a premium name” to sell AIG’s life insurance and investment products, said William Batcheller, fund manager at National City Corp., which owns about 5.7 million AIG shares.

Korea’s Hyundai Group needs the investment to shore up its affiliates. The shipping, construction and financial conglomerate has already received government aid for its semiconductor and construction units.

Hyundai Securities, Korea’s second-largest brokerage, and two of its affiliates will benefit from fresh funds and asset management expertise of the investors, Ross said.

Details of the purchase will be announced today.

Hyundai Securities, Hyundai Investment Trust & Securities Co. and Hyundai Investment Trust Management depend on one another to create and distribute financial products.

The AIG-led group will be the biggest shareholder in each of the companies.

AIG, with a market capitalization of $182 billion, plans to spend $471 million for a 55% stake in Hyundai Investment Trust & Securities and $78.5 million for 29% of Hyundai Investment Trust Management, said a person involved in the negotiations.

The group will buy 57 million preferred shares, or about a third, of Hyundai Securities Co. for $5.49 each, 30% less than market price, the person involved said. Hyundai Securities confirmed the $314-million investment and the stake.

“They want to set a precedent even if it’s at a discount,” said Michael Preiss, a senior investment strategist, who helps manage $2 billion of investments at MeesPierson Asia (H.K.) Ltd. “They really want to clean it up and get it out of the way.”