AIG uses cash on hand for $5.56 billion purchase; financing possible

By Devika Patel

Knoxville, Tenn., Jan. 22 – American International Group, Inc. will use cash on hand to fund its $5.56 billion planned acquisition of Validus Holdings, Ltd. but will evaluate financing opportunities following the transaction.

Validus shareholders will receive $68 per share owned.

“The total deal consideration is $68 per share, or approximately $5.6 billion in aggregate, which AIG will pay for with cash on hand,” executive vice president and chief financial officer Siddhartha Sankaran said on the company’s conference call announcing the acquisition on Monday.

“We will also evaluate opportunistic financing opportunities closer to the closing date,” Sankaran said.

The company is not worried about its cash position after the acquisition.

“Right now, we have sufficient cash on hand to execute the transaction as of today,” Sankaran said.

“Of course, we generate incremental free cash flow over the course of the year.

“We’ll be opportunistic in the market around to funding alternatives as time evolves,” Sankaran said.

The company’s balance sheet and liquidity profile are expected to remain “strong” after the acquisition closes and the leverage ratio will increase by about 50 basis points.

“We expect to maintain a strong balance sheet and liquidity profile following the transaction,” Sankaran said.

“The combined company’s leverage ratio will increase by roughly 50 basis points, given the relatively small amount of Validus debt outstanding,” he said.

The company’s management is pleased with its balance sheet, both for now and in future projections.

“Post the transaction, the balance sheet remains very strong,” Sankaran said.

“We have a good leverage profile.

“We have a good free cash flow profile and capital ratios are at target levels.

“We feel very good about how the balance sheet is positioned today and the future,” he said.

The acquisition is expected to close by the middle of this year.

AIG is a global insurance company based in New York.

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