NEW DELHI: The Private equity investment arm of AIG is learnt to be in advanced stages of negotiations for acquiring close to 14-15% stake in Bangalore-based real estate firm RMZ, for about $350 million. The companies are likely to give finishing touches to the deal and make a formal announcement shortly. This would be one of the largest private equity deals in the Indian real estate sector.

“The contract has not been signed yet. Hence, we cannot confirm the figures. A formal announcement will be made mid-week,” an AIG spokesperson said, but refused to confirm the value of the deal.

“We may be diluting a significant equity. But it will not be possible to share the exact financial details. We cannot disclose the name of the investor,” said an RMZ official. Sources say all necessary formalities for the deal have been completed, the only deterrent being valuation, one of the most recurring problems in case of deals involving unlisted players.

“There are some minor problems that RMZ has over the valuation, which will hopefully be sorted out,” a source in RMZ said. Investment banking sources in the know of the deal have said the estimated value of the deal is close to $350 million. However, a senior official in AIG refused to confirm the value of the deal.

In the past 10-12 months, the real estate sector in India has seen a slew of private equity investments. The Shapoorji Pallonji Group has been in talks with some PE investors, including Government of Singapore Investment Corporation (GIC), Dubai Capital and Abu Dhabi Investment Authority (ADIA), for raising about $400 million. Recently, Morgan Stanley invested about $152 million in Oberoi Constructions and JP Morgan invested $100 million in Emaar-MGF.

Not all potential deals, however, attain financial closure. Around 7-8 much-talked about PE deals in the last one year could finally not fructify on issues of valuation, which have been a major reason of discord between real estate companies and PE players. Last year, in an interview on the Indian real estate sector, Starwood Capital Group CEO Barry Sternlicht said, “You have to make sure you actually own things.

We had a much larger deal under contract and we couldn’t close it because of a fiduciary commitment to our investors which are the US Pension Fund, HNIs and corporate funds. The titles were too opaque.”
Source: Economic Times MONDAY, APRIL 02, 2007 12:47:30 AM