American International Group Inc.’s initial public offering of its main Asian unit values the company at as much as US$30.5 billion ($40.1 billion), said three people with knowledge of the matter.

 

AIG, the bailed out insurer, plans to sell about 50% of AIA Group in the initial public offering in Hong Kong, said one of the people, who declined to be identified because they aren’t authorized to discuss the deal publicly. The exact share to be sold will be determined today, the person said.

 

The high end of the valuation range for AIA matches the US$30.4 billion revised bid from Prudential Plc that AIG turned down four months ago. At about US$15 billion, the IPO would be the largest in Hong Kong since the sale of Industrial & Commercial Bank of China in 2006.

 

Investors “are probably more tempted by a valuation closer to US$30 billion,” said Christopher Wong, Singapore senior investment manager at Aberdeen Asset Management Plc, which oversees US$267 billion. “The offering is already factoring in pretty aggressive growth rates in an uncertain global operating environment.”

 

AIG, once the world’s largest insurer, is selling assets to help repay US$182.3 billion of government bailout. Prudential Financial Inc. the second-largest U.S. life insurer, last week agreed to pay US$4.8 billion for two of AIG’s Japanese life insurance units.

 

Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley are leading banks arranging AIA sale. The stock is scheduled to start trading on Oct. 29.

 

AIA operates in 15 Asian markets with 23,500 employees, 320,000 agents and more than 23 million of in-force policies, according to a Sept. 20 statement. Its in-force policies are worth US$13.9 billion, according to a Sept. 24 report by Goldman Sachs.

 

AIG had to lower the valuation of AIA to ensure a US$1 billion investment from the Kuwait Investment Authority, the Financial Times reported yesterday, citing unidentified people. KIA agreed to invest on the basis that AIA would be valued at US$30 billion to US$32 billion, the FT said.

 

AIG’s board approved a plan for the U.S. Treasury Department to convert US$49 billion preferred shares into common stock so that the government can begin to wind down its majority stake, a person familiar with the matter said on Sept. 30.

 

Robert Benmosche, AIG’s chief executive officer, put a public share sale of AIA back on the table after the talks with Prudential Plc collapsed. Patricia Chua, a Hong Kong-based spokeswoman for AIA, declined to comment on the valuation.