UBS buys Commodity Index Business of AIG

by Richard Kilner

Story link: UBS buys Commodity Index Business of AIG

UBS Investment Bank has entered an agreement with insurer AIG to purchase the commodity index business of AIG Financial Products Corp (including the rights to the DJ-AIG Commodity Index).

The commodity index business is made up of funded notes (based on the benchmark Dow Jones-AIG Commodity Index (DJ-AIGCI)) and a product platform of commodity index swaps.

When the binding agreement closes the fee of $15m becomes payable.

Over the next year and a half additional payments of up to $135m may occur, contingent upon the commodity index business’ performance in the future.

The deal is expected to close around May of this year, and remains subject to regulatory approval and other conditions being met.

The agreement follows on the heels of the sale of AIG Life Insurance Company of Canada to BMO Financial Group (13 January).

BMO purchased the Life Insurance Company for approximately C$375m, and that deal is expected to close on 1 June 2009.