The equities business of UBS Investment Bank has announced a binding agreement to purchase the commodity index business of AIG Financial Products, including AIG’s rights to the DJ-AIG C
The equities business of UBS Investment Bank has announced a binding agreement to purchase the commodity index business of AIG Financial Products, including AIG’s rights to the DJ-AIG Commodity Index.
The commodity index business is comprised of a product platform of commodity index swaps and funded notes based on the benchmark Dow Jones-AIG Commodity Index. The index is also the basis for a broad range of exchange-traded commodities offered in Europe and elsewhere.
The purchase price for the transaction is USD15m, payable upon closing, and additional payments of up to USD135m over the following 18 months based upon future earnings of the purchased business. The transaction is expected to close by May 2009, subject to various regulatory and other conditions.
The DJ-AIG Commodity Index is composed of futures contracts on physical commodities. The index is composed of commodities traded on US exchanges, with the exception of aluminium, nickel and zinc, which trade on the London Metal Exchange.
Indexes in the DJ-AIGCI family are calculated on both an excess return and total return basis. The excess return indexes reflect the return of underlying commodity futures price movements only, whereas the total return indexes reflect the theoretical return on fully-collateralised futures positions.
The DJ-AIG Commodity Index family includes sub-indices representing major commodity sectors within the broad index: energy (including petroleum and natural gas), petroleum (including crude oil, heating oil and unleaded gasoline), precious metals, industrial metals, grains, livestock, softs, agriculture and ex-energy. Also available are single indices on all of the individual components of the index, plus cocoa, lead, platinum and tin.
The index family also includes forward indices, which are designed to represent the index composition one, two and three months into the future, and which meet the increasing interest in tracking exposure to longer-dated commodity futures contracts. As well as US dollars, versions of the standard and total return indices denominated in yen, euro, Swiss francs and sterling also are maintained.
