Icahn Set to Defy American International Group Inc (AIG) Plans

Icahn Set to Defy American International Group Inc (AIG) Plans

American International Group Inc. has launched a separate website that details plans; Icahn also set to pursue proxy fight

Icahn Set to Defy American International Group Inc (AIG) Plans

By on Feb 2, 2016 at 3:37 pm EST

Carl Icahn, activist investor at American International Group Inc. (NYSE:AIG), is all set to defy the strategy outlined by CEO Peter Hancock last week. On Monday, AIG launched a website that provides information about the strategy outlined by Mr. Hancock. In addition, four videos have been uploaded in which investors can listen to Mr. Hancock and three other executive team members. It is an effort to explain various steps that have already commenced to provide support to the goals highlighted in the strategy announcement.

Last year, DuPont also launched a separate website. This was introduced after Nelson Peltz, an activist investor who held the fifth-largest shareholder position, criticized the firm for its underperformance. According to Wall Street Journal, the proxy fight cost the company around $15.4 million. Eventually, DuPont defeated Peltz, when the majority of shareholders voted against Peltz.

The step undertaken by AIG could be an added cost just as the firm plans to reduce its operating cost. However, the website has been initiated to welcome shareholders and answer their concerns which could benefit the company in the long run.

In response, Carl Icahn informed Bloomberg via a telephone interview that he is making efforts to overthrow the present management. He also plans to present a new list of potential board members, by the end of next week. An attention-grabbing move came after trade halted in New York on Monday. The activists’ company issued a filing that states that Samuel Merksamer and Courtney Mather should be included in the board of directors of companies in which Icahn holds interest. Both Mather and Merksamer have been managing directors at Icahn Capital LP.

AIG has lost nearly 9% share price in 2016. In comparison, S&P 500 Index has lost 5.12% year to date (YTD) and Berkshire Hathaway Inc. (NYSE:BRK.B) has shed just 2.56% YTD.

The announcement on January 26 entailed major strategic shifts to be achieved in response to Carl Icahn’s pressure. He had persistently insisted on radical segregation of the diversified company into just strategic three business units (property casualty, life insurance, and mortgage insurance).

The declared approach includes three structural changes; reduction of $1.6 billion in operating cost, and return of $25 billion to shareholders. Structural changes planned include offering of 19.9% of United Guaranty in IPO, sale of A.I.G Advisory Group, and formation of nine different business units for nine distinct operations. Steenland, Chairman of AIG, restated his support for CEO Peter Hancock’s plan to slowly narrow down the company’s focus. He added “We look forward to continued discussions with our shareholders on the strategy we have advanced.”

Editing by Mobin Nasir; Graphics by Ahsan Mansoor

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