TAIPEI: The short list of potential buyers has been set in the bidding for Nan Shan Life, the Taiwan component of American International Group (AIG). Reports say global buyout funds including Bain Capital and Carlyle, are in talks with local firms, attempting to set up all-important local partnerships for the second round of bidding in the estimated $2 billion deal. AIG had recommended establishment of local partnerships in order to overcome concerns that any deal could be blocked by regulatory authorities in Taiwan.

Taiwan regulators have already stated they want second-round overseas bidders to establish local partnerships. However, that pre-condition makes the process trickier and prospects for any deal more uncertain, the sources said.

"The pre-condition of Taiwan regulators makes the situation much more complicated and uncertain. Even for those who are now going to form a consortium, things may be changed in the third-round or fourth-round bid if regulators ask for more specific restrictions," the source said.

The US private equity firm Bain Capital is in talks with Chinatrust for a possible joint bid for Nan Shan, said one source.

Bain and Chinatrust Financial Holding Co Ltd have yet to agree on a joint bid, he added.

Primus Financial, a new investment firm led by Robert Morse, a former top Citigroup banker for Asia, and MBK Partners, a buyout fund founded by former Carlyle dealmakers, have been shortlisted for second-round bids for AIG's Nan Shan Life, said the sources who were briefed on the progress of the bidding.

American International Group, bailed out by the US government in the financial crisis, is selling its Asia assets to shore up its capital base and the sale of Nan Shan could fetch over $2 billion, said the sources.

Sources in Taiwan also confirmed to Reuters that overseas funds are in talks with local firms to form joint bids but declined to say whether any formal joint bid has been established.

Besides Chinatrust, Fubon Financial Holding Co Ltd also won the right to enter the second-round bid, said the sources. They declined to name the potential partner for Fubon.

Chinatrust is already partly owned by the private equity arm of Morgan Stanley, which supports Chinatrust's bid for Nan Shan, said the sources.

Separately, Morgan Stanley, which owns nearly 5 percent of Chinatrust, has won approval from Taiwan regulators to raise its stake in Chinatrust to 9.9 percent.

The ongoing Nan Shan bid and Morgan Stanley Private Equity's (MSPE) holdings in Chinatrust are two separate cases and MSPE will raise and keep its stake in Chinatrust as planned, said one of the sources.

Morgan Stanley and Blackstone Group are advisors for Nan Shan.

All sources declined to be identified since the bidding process is intended to be confidential. Representatives for Bain, Carlyle, Primus, Chinatrust and Fubon all declined to comment. MBK could not be immediately reached for comment.

Washington-based Carlyle Group has long-term experience of insurance investments in Asia.

China Pacific Insurance, the No 3 life insurer on the Chinese mainland, in which Carlyle holds around a 17 percent stake, is planning to raise $3.5 billion from a Hong Kong listing, a channel for Carlyle to cash out.

Reuters

(HK Edition 07/22/2009 page2)