Fortress Investment Group (FIG) has entered into a definitive agreement to acquire nearly 80% of American International Group (AIG) subsidiary American General Finance (AGF). The transaction is set to close at the end of 2011's first quarter.
According to this morning’s announcement, Fortress managed funds and its affiliates will purchase the greater part of AGF from the insurance giant. While the terms of the transaction were not disclosed, the press release states that AIG will retain a 20% interest in the consumer credit entity.
Wesley Edens, co-chairman and founder of the New York-based asset management company, said in his comments that FIG’s acquisition of the roughly 90-year old provider of loans, retail financing and other credit products to clients in the U.S., Puerto Rico, the Virgin Islands and the U.K. will prove to be a great move for the firm.
“AGF is an exceptional franchise with a strong management team and a leading platform for serving the financing needs of consumers nationwide,” Edens stated in the release. “We believe that AGF is well-positioned for significant growth in an underserved market.”
Also, when the transaction passes through the customary hurdles of the regulatory approval process, AIG is expected to deconsolidate AGF from the its financial statements. Currently, the credit arm has roughly $20 billion in assets with approximately $18 billion in liabilities. This also includes $17 billion in debt, the statement explained.
“This transaction marks another important step in our ongoing restructuring process as we seek to monetize non-core assets and pay back U.S. taxpayers,” Robert Benmosche, AIG president and CEO, said in the announcement. “In Fortress, we have found an excellent partner for this terrific franchise. We believe in AGF's solid business model, which is why we are retaining a 20% percent stake in the business as part of this transaction.”
In looking back to April, the firm put the finishing touches on its pursuit of Logan Circle Partners from Chicago- and New York-based Guggenheim Partners. Initial announcements of FIG's purchase can be traced back to February when it said that it expected to purchase the traditional fixed-income firm for “approximately $21 million in cash with the potential for an additional payment at the end of 2011.”
Currently, FIG, which was first established in 1998, manages nearly $41.7 billion in private equity, credit and liquid markets for its institutional and private investor clients.