The time has come for the “creative destruction” of American International Group, says Bernstein & Co. LLC analyst, Josh Stirling.
“We’ve long been bullish on
AIG’s potential, [but] there is a lack of evidence the firm’s current turnaround is making even tactical progress,” Stirling wrote in a research note last week.
Stirling made waves by suggesting that the insurer liquidate itself, in whole or in part, in order to simplify operations, reduce structural challenges and “unlock its substantial conglomerate discount.”
“We think it evidently clear that today AIG is worth more dead than alive,” Stirling finished in a stark conclusion. “The optimum strategy we believe is selling the company off piece by piece to its competitors.”
The note comes as AIG is facing increased pressure from shareholders, led by activist Carl Icahn, to engage in a strategic breakup in order to improve performance and returns.
Icahn, who is AIG’s fifth-largest shareholder, owns more than 42 million shares worth US$2.61 billion, giving him a 3.4% stake in the company.
He has told reporters that it has become “abundantly clear” that Hancock is not willing to “sincerely consider” the breakup plan, and hopes that other shareholders will approve his consent solicitation, which may include a proposal to replace Peter Hancock as CEO.
Icahn is taking his proposal to investors now, as he says he cannot wait until the spring annual meeting date to raise the issue.
“AIG is too important, and the current situation is too time-sensitive, to wait years,” he said.
The move is an unusual one for a shareholder, and the
Wall Street Journal reports that only five such precatory proposals to break up a company have been put forward since 2009. Only three have been successful.
A shareholder proposal requires a majority of all shares outstanding, and is not binding. However, analysts say such a vote would signal a “clear victory” for Icahn and be difficult for the AIG board to ignore.
Hancock has told investors and analysts AIG plans to take a middling approach and perhaps sell some business units, but insists he will not take a “machete” to the company. Neither will he sell prominent units, such as AIG’s mortgage insurance business, unless an appropriate offer is made.
AIG posted a US$231 million net loss in the third quarter.
