AIG Deconstructed: Why AIG Owns U.S. Ports
NEW YORK (
) -- Could the sinking -- or at least seriously listing -- ship that is
American International Group
(AIG) - Get Report
take six major U.S. ports down with it?
AIG Global Investment Group, an arm of the insurer, acquired
P&O Ports North America
in March 2007 from
Dubai Ports World
. Along with the purchase it gained ownership of six major ports including those in New York/New Jersey, Philadelphia, Baltimore, Miami, Tampa and New Orleans. And New Orleans, it is worth noting,
is one of the world's busiest ports
.
As the newest revelation in our
ongoing series deconstructing the tangle of AIG
, the ownership of the ports is yet another reason why the dismantling of the flailing insurer is so potentially problematic for the U.S. economy.
As part of the deal, AIG also purchased stevedoring operations in 16 locations along the East and Gulf Coasts, along with a passenger terminal in New York City. At the time, the deal was valued at $700 million, but the terms were not disclosed.
(Those less than impressed by AIG's management can take heart: the company is only involved at an investor level and has no say over port security.)
"AIG Global Investment Group has been a leader in acquiring strategic, regulated infrastructure businesses and assets. We have identified the marine terminals sector as a key element in our infrastructure investment strategy, and we believe that POPNA is one of the leading operators in this sector in the United States," Christopher Lee, AIG Global Investment Group managing director, said in a statement at the time of the deal.
But now that AIG is shedding assets to repay its $85 billion loan from the government, the fate of P&O Ports remains unclear.
A spokesperson at AIG said there has been no news surrounding P&O for several years and would not comment on the future of the business.
But Joe Paduda, former director of marketing in AIG's managed-care subsidiary, says he expects AIG to retain its stake in the company. "It is likely undervalued now due to the recession and accompanying drop in traffic," says Paduda, who is now a principal of managed-care consulting firm Health Strategy Associates.
P&O Ports North America, it's worth noting, was the center of controversy long before AIG laid its behemoth paws on it. The Bush administration came under fire when it approved the sale of P&O to Dubai in February 2006. Critics at the time questioned the decision to allow an Arab-owned company to oversee U.S. ports, believing the move would adversely affect security at the ports.
The sale of the ports to AIG took place one year after the controversy.
This is not the only port business AIG owns.
AIG Highstar Capital
-- a group of private equity professionals sponsored by AIG Global Investment that makes investments in infrastructure assets and businesses -- purchased Amports shortly after the P&O deal in April 2007.
Amports is based in Jacksonville, Fla. and operates ports in Baltimore, Md.; Benicia, Calif.; Brunswick, Ga. and Mexico.
More articles in this series:
AIG Deconstructed: AIG Owns Bulgaria's Phone Lines?
AIG: Footing the Bill for the World's Richest Team
AIG Deconstructed: Stowe Mountain
AIG Deconstructed: Philam Life
AIG Deconstructed: Why AIG Owns 900 Jets
AIG Deconstructed: AIG Rules Iraq
-- Reported by Jeanine Poggi in New York
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