Carl Icahn to Solicit Shareholder Support for AIG Breakup -- 4th Update
November 23 2015 - 01:16PM
Dow Jones News
By David Benoit and Anne Steele
Carl Icahn said he intends to take his fight to break up
American International Group Inc. directly to shareholders, a move
that could ramp up the pressure on the insurance giant with a vote
over its strategy.
The company quickly fired back Monday, reiterating that Mr.
Icahn's plan to split its various insurance offerings "did not make
financial sense." However, the insurer added that it will update
shareholders on its own strategy changes faster than it originally
planned.
Mr. Icahn said he owns more than 42 million AIG shares, the
first time he has disclosed the size of his positions since he
called on the giant insurer to pursue a split into three separate
companies last month. A key part of his case is that if AIG were
split up, each of the companies would be small enough to avert the
"systemically important financial institution" designation, which
carries heightened scrutiny and requirements to hold robust capital
buffers against losses.
Mr. Icahn's stake is worth $2.61 billion and would give him
about a 3.4% stake in AIG, making him the fifth-largest
shareholder, according to FactSet data.
Mr. Icahn said it has become "abundantly clear" in talks with
AIG Chief Executive Peter Hancock that he isn't willing to
"sincerely consider" the breakup idea.
AIG last week held meetings with large investors and analysts
during which it signaled it would take increased steps to boost
shareholder value, including reviewing costs and capital returns,
analysts said. The company is "actively pursuing at least one sale"
of a business, but investors shouldn't expect a flurry of deals,
Sanford C. Bernstein's Josh Stirling said after last week's
meetings.
AIG has told employees that it has been approached by a party
interested in its broker-deal network, and The Wall Street Journal
has reported AIG is also considering the separation of its
mortgage-insurance unit.
Mr. Icahn said his consent solicitation may include a proposal
to add a new director who he hopes could be a candidate to replace
Mr. Hancock as CEO. Mr. Icahn didn't name a nominee.
Since making his breakup proposal public, the billionaire
investor said many large institutional shareholders and analysts
have expressed their support for his views.
Financier John Paulson has made a similar push to encourage AIG
to split. He bought into the company earlier this year and held
14.6 million shares, or just over a 1% stake, as of Sept. 30.
Mr. Icahn is betting the majority of shareholders will support
him and said he wasn't willing to wait until the spring annual
meeting date to show the company that support.
"AIG is too important, and the current situation is too
time-sensitive, to wait years," he said.
Any shareholder proposals urging a breakup would be nonbinding,
though a clear victory would present challenges for the board to
ignore it. For instance, proxy advisory firms can withhold support
for directors who reject such a vote in the subsequent year, which
adds to the pressure to seriously review such a proposal.
Any shareholder proposal, including the removal and addition of
any director outside of an annual meeting, requires a majority of
all shares outstanding, a higher bar than just the majority of
shares that vote at a meeting. That threshold makes such challenges
rare.
In 2013, Relational Investors LLC and the pension giant
California State Teachers' Retirement System, or Calstrs,
successfully led a shareholder vote to urge the breakup of steel
company Timken Co. While Timken had previously resisted the split,
the company initiated a new review after the vote and ultimately
did break up.
That result led some activists and corporate advisers to expect
to see a wave of such nonbinding proposals, and while several have
been threatened or discussed, they remain few and far between. Mr.
Icahn initially proposed a motion to break up eBay Inc. last year,
but dropped the matter. This year, eBay and PayPal Holdings Inc.
separated and Mr. Icahn maintains a stake and board representation
in PayPal.
With AIG, Mr. Icahn has called for the global insurer to
separate both its life and mortgage insurance units from its core
property-and-casualty business, and embark on a cost-control
program.
AIG shares edged up 0.5% and are up 12% so far this year.
Leslie Scism contributed to this article.
Write to David Benoit at david.benoit@wsj.com and Anne Steele at
Anne.Steele@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 23, 2015 13:01 ET (18:01 GMT)
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