Chubb has approached American International Group for a potential takeover, according to reports first surfaced by Insurance Insider. If consummated, the deal would rank as the largest in insurance history, a sector that has seen plenty of mega-mergers but nothing quite at this scale.
AIG shares climbed approximately 6% on the news before giving back gains as both companies moved to pour cold water on the speculation. AIG said it is “not for sale,” while Chubb denied that any formal offer had been made.
The numbers behind the speculation
The potential transaction has been pegged at over $42 billion, which would create a combined insurance giant worth roughly $150 billion.
The market clearly read between the lines. That initial 6% pop in AIG’s stock price tells you everything about how traders interpreted the situation. Investors were pricing in at least some probability that a deal, or at least a meaningful premium, was on the table.
