Franklin Resources steps closer to buy AIG arm assets

MUMBAI: The consortium led by Franklin Resources may be a step closer to buying assets of AIG Investments, the asset management arm of AIG.

The other set of joint bidders, Religare Enterprises-Macquarie, are believed to have backed out of the race to acquire the $100-billion assets of AIG Investments.

A person familiar with the development, who did not wish to be identified, said the terms set by AIG for Religare Enterprises to acquire the assets were not acceptable to the Indian company. ���Some of the terms such as stake of the top AIG management and the board composition after the acquisition were unacceptable,��� the person said.

Franklin Templeton is likely to buyout AIG���s asset management arm at $500-600 million, which is 0.5-0.6% of AIG assets. Franklin and AIG have asset management arms in India, but is not clear whether Franklin would fully own AIG���s local unit, if the acquisition goes through.

AIG is selling its assets to repay the US government���s bailout package of $182.5 billion, which was received to save the US financial giant from bankruptcy. The company has been badly hurt by writedowns on assets linked to subprime mortgages and capital losses.

Mutual fund industry officials said the valuation of AIG Investments at the proposed 0.5-0.6% of its assets is cheap by both global and emerging market standards. They said, in the past, global AMCs have been bought at roughly 2% of their total assets.

A top official at a leading private mutual fund, who did not wish to be identified said: ���The deal is good for the buyer, but we do not know about the extent of quality of AIG���s assets. Historically, always the stressed assets have given the best returns to a buyer, provided they are able to turn it around.���