American International Group Inc. (NYSE: AIG) last Thursday was expected to hold a meeting of the LP advisory board for its second Global Emerging Markets fund. The gathering was to be a chance for AIG to introduce investors to new GEM II management, and also to convince them that the sky isnt falling after last months dual dismissals of former fund chief Peter Yu and managing director William Jarosz (See Buyouts, 5/9/05, pg. 4).
This is a true test for AIG, said a source familiar with the situation, just before Buyouts went to press last Wednesday night. If the advisory board members are convinced that AIG made a good decision, then the fund goes forward. If not, they could pull their commitments.
AIG spokesman Andrew Silver confirmed plans for the meeting, but downplayed the suggestion that it would essentially serve as a referendum on GEM IIs continued viability: Thursdays meeting is to introduce [new GEM II head] David Yeung to those who dont already know him, and to provide an update on deals in the pipeline and to review the status of the fund, Silver explained. We will also reiterate to the advisory board what weve communicated to all limited partners over the past three weeks, which is that the funds underlying strategy remains the same.
One question LPs are sure to ask is why Yu and Jarosz were terminated at the same time that many of their investments were bearing ROI fruit. In early April, the group sold its 10% holding in Orange Romania to France Telecom at a purchase price multiple of approximately 4x, as part of a larger transaction. A few weeks later and just days after the firings GEM I generated another $131 million through a secondary IPO for Brazilian discount airliner GOL Linhas Aereas Inteligentes SA.
Neither Yu nor Jarosz are talking, and sources close to the pair insist that the firings were without cause, except that they were linked to a spinout agreement that was unpopular with post-Hank Greenberg management at AIG. Spokesman Silver continues to say that the company doesnt comment on personnel matters, to the point that he cant even confirm that the departures were involuntary.
In other AIG Capital Partners personnel news, Charles Mixon resigned shortly after the terminations, as did senior advisor Thomas Armstrong (co-founder of Advent International). Expanding out a bit further into the AIG private equity sphere, Regina Mello recently resigned from the firms mid-market Horizon effort, while lower-level investors Chong Moua and Eric Jensen also left, for American Capital and NewSpring Capital, respectively.
Both Yu and Jarosz were informed of their terminations on Monday, April 25, and then were escorted out of their offices by company security, multiple sources said..