Jul 30, 1998

AIG to Invest $1.35 Billion in The Blackstone Group and Its Funds

NEW YORK--(BUSINESS WIRE)--July 30, 1998 – American International Group, Inc. (AIG) and The Blackstone Group today announced the initiation of a long-term investment agreement valued at approximately $1.35 billion. Under the terms of the agreement between the two firms, AIG will acquire a 7% limited partnership interest in The Blackstone Group and its affiliated companies for $150 million. In addition to its investment in The Blackstone Group, AIG has agreed to invest over a number of years an estimated $1.2 billion as a limited partner in future private equity, real estate, and other funds The Blackstone Group sponsors.

The formalization of this relationship comes after years of close cooperation between AIG, the global insurance and financial services organization, and Blackstone, the private merchant bank. M.R. Greenberg, Chairman and Chief Executive Officer of AIG, has served as an Advisory Director of The Blackstone Group since Blackstone established its first advisory board in 1989.

Commenting on the agreement, Mr. Greenberg said, "Through our investments with Blackstone in the past, we have had an opportunity to observe its growth and success for many years. The returns achieved by all the Blackstone funds in which AIG has invested have been at the highest levels in the industry. The disciplined methodology and management processes that underlie this performance record make Blackstone’s achievements a standard of excellence in every sector in which they compete. We look forward to working closely with Blackstone in a variety of asset management, advisory and investment activities in the years ahead."

Blackstone’s co-founders, Peter G. Peterson (Chairman) and Stephen A. Schwarzman (President and CEO), said in a joint statement, "AIG is one of the very best managed and most profitable financial services organizations in the world. It enjoys an unparalleled reputation for success in virtually every global market. We deeply appreciate the fact that AIG has decided to make an equity investment in our firm and a major new long-term commitment to our funds. This broadens our capital base and allows us to explore more fully the multitude of new opportunities in private equity and other alternative asset classes that the marketplace is opening to us on a global basis."

The two firms are also discussing possible cooperation in several areas of joint interest. "AIG is the pre-eminent global insurance organization and a leader in financial services throughout Asia and in many emerging markets," observed Peterson and Schwarzman. "Through the relationship with AIG it is possible that we will be introduced to new opportunities in various parts of the world." For example, given the current crisis in Asia, where AIG has a remarkable history and in-depth expertise on local markets, senior management of both firms believe there may be opportunities to utilize Blackstone’s expertise in cross-border Mergers & Acquisitions Advisory and Restructuring & Reorganization Advisory services, where Blackstone is a leader. In the M&A area, Blackstone is among the most experienced advisors on large trans-Pacific transactions as well as an advisor to some of the largest companies in the world. In the restructuring area, Blackstone is the market leader among Wall Street firms and is currently an advisor in such well-known situations as Barney’s, Caldor, Dow Corning, and Montgomery Ward.

AIG’s future investments in Blackstone funds will be subject to certain conditions that, on the one hand, assure AIG of certain minimum performance levels and, on the other hand, assure Blackstone of its continued and complete independence as the general partner in funds it sponsors. The agreement limits AIG’s participation in funds managed by Blackstone so that such funds can continue to have broadly diversified bases among leading institutional investors.

Blackstone also announced today that it had ended its longstanding alliance with The Nikko Securities Co., Ltd. of Japan and redeemed Nikko’s $100 million limited partnership interest in Blackstone. In their statement, Peterson and Schwarzman noted, "As a result of the changing financial environment in Japan and the challenges posed by the Tokyo `Big Bang,’ we agree with Nikko’s decision to establish a partnership with a diversified, full-service global investment bank. In our view, Nikko’s proposed relationship with Travelers/Salomon Smith Barney represents the right course for Nikko, although it precludes a continued partnership with Blackstone. As long-time partners, however, we wish all our colleagues at Nikko, as well as our many friends at Travelers/ Salomon Smith Barney, much success in their new arrangement."

AIG is the leading U.S.-based international insurance organization and among the largest underwriters of commercial and industrial insurance in the United States. Its member companies write property, casualty, marine, life and financial services insurance in approximately 130 countries and jurisdictions, and are engaged in a range of financial services businesses. American International Group, Inc.’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

For 1997, AIG was ranked first among all U.S.-based insurance and financial services organizations in net income, and 17th among all U.S. public corporations. AIG’s 1997 net income was a record $3.33 billion and the company’s revenues amounted to $30.6 billion. At June 30, 1998, AIG’s assets were approximately $175.0 billion and capital funds (or shareholders’ equity) was approximately $25.7 billion. AIG’s strong financial position is reflected in AIG’s Triple-A debt ratings from the principal rating services, Moody’s and Standard & Poor’s.

The Blackstone Group, founded in 1985 by Peter G. Peterson (Chairman) and Stephen A. Schwarzman (President and CEO), is a private merchant bank headquartered in New York. Blackstone is active in five main business areas: Private Equity Investing (Blackstone Capital Partners III, the firm’s current fund, with nearly $4 billion in equity capital, was the largest such fund raised in 1997), Real Estate Investing (with a fund of $1.1 billion), Liquid Alternative Asset Management, Mergers & Acquisitions Advisory, and Restructuring & Reorganization Advisory.