AIG, Korea hit snag in $1.6-billion Hyundai deal

New York, Aug 23: A $1.6-billion deal between South Korea and American International Group Inc to hand over control of three Hyundai Group financial units to a consortium led by the US insurer hit a snag on Thursday, as AIG stood tough on price terms.

AIG has been haggling for more than a year to complete the Hyundai deal which would give AIG access to 245 financial branches and would be a welcome lift for South Korea’s effort to spur corporate reforms through overseas investments. AIG signed a memorandum of
understanding (MoU) on Thursday to invest 1.1 trillion won ($860 million) — a record foreign investment in the country — to take control of the nation’s second-largest brokerage and two troubled money managers. The South Korean government agreed to invest 900 billion won ($700 million). But, final terms have not yet been agreed as AIG looks to cut the price for a stake in brokerage Hyundai Securities Co Ltd, the major unit in the three-pronged deal.

Hyundai Securities is asking AIG to pay 8,940 won per new preferred share under the terms of the MoU. The deal would not go ahead “unless this or other aspects of the transaction are promptly modified,” AIG said in a statement. Hyundai Securities’ shares fell 10 per cent to 9,000 won after the agreement was announced.

The shares had gained for two days in anticipation of the news. AIG shares rose 54 cents to $78.12 on the New York Stock Exchange.

(Reuters).