Clayton Dubilier partner to head AIG

Edward Liddy, an operating partner with private equity firm Clayton, Dubilier & Rice, has been selected by the US government to head ailing US insurance giant American International Group.

Liddy, the former chairman and chief executive officer of Allstate, will replace AIG’s chief executive officer Robert Willumstad, who was forced to step down from his role by US Treasury Secretary Henry Paulson.

Edward Liddy

The government on Tuesday evening agreed to extend a two-year, $85 billion (€60 billion) revolving credit facility to AIG to ensure the company continued operating and didn’t crash into bankruptcy. The government in return will receive a 79.9 percent stake in the company in the form of stock warrants. The loan, which is secured by AIG’s more than $1 trillion in assets, will give the company time to sell some of its businesses in an “orderly manner” to repay the government, according to a statement from the Federal Reserve. Taxpayers could reap a profit in the deal if AIG rebounds.

As part of the rescue package, the government assumed the authority to change the company’s senior management, decisions that are usually made by a company’s board of directors.

Liddy is expected to oversee the sale of some of the company’s businesses. Liddy has been working with New York-based Clayton Dubilier for about a year. The firm is staffed by financial partners, who focus on deal structuring, and operating partners, who oversee the management of portfolio companies.

A person close to the situation said Liddy is expected to return to the firm when he is finished with his duties at AIG. Liddy’s appointment to head AIG will not affect any pending deals Clayton Dubilier may be involved in, the person said. 

Liddy served as the CEO and chairman of Allstate from 1999 to 2006. In the 1990s, he helped sell off various businesses in the Sears, Roebuck & Co. empire as chief financial officer. He also worked under former US defense secretary Donald Rumsfeld at drug maker G.D. Searle & Co, where Rumsfeld served as chief executive in the 1980s.

The firm boasts an impressive bench of corporate heads who work as operating and special partners, including Jack Welch, former chief executive of General Electric, and Charles Banks, former chief executive and chairman of UK-based construction materials supplier Wolseley.