American International Group, Inc. (AIG) has gained regulatory approval to purchase a 13.5 percent stake in Chinese motorcycle and auto producer Chongqing Lifan Industry Co., Ltd. for $90 million.
The U.S.-based insurance giant would become Lifan's second-largest shareholder after the deal, which is said to have gained approval recently by China's Ministry of Commerce.
Lifan is one of the biggest privately owned enterprises in China. Founded in 1992, the company sells engines, scooters, motorcycles, ATVs and cars in more than 100 countries. In 2006, Lifan delivered 2.54 million engines and recorded sales revenue of $311.7 million — all made solely through exported product.
Lifan plans to use the funds from the AIG deal to finance its auto and engine manufacturing projects and to expand its overseas business, the company revealed in a prepared statement.
AIG, with operations in more than 130 countries and jurisdictions, offers property-casualty and life insurance programs, as well as retirement services, financial services and asset management. In 1992, AIG became the first foreign insurance organization to receive a license to operate general and life insurance business in the People's Republic of China.
"We are very excited to have the opportunity to play a larger role in the economic growth of China," AIG chairman and CEO Robert B. Willumstad says.
Willumstad, a former Citigroup Inc. executive who had already been chairman of the insurer, took over as CEO last month after AIG posted two consecutive quarters of record losses on subprime mortgage investments.