AIG was closing in on a deal on Sunday to sell its foreign life insurance unit to MetLife Inc for more than $15 billion in cash and stock, leaving it with a substantial minority stake in MetLife, sources familiar with the matter said.

MetLife is expected to pay about $6.8 billion in cash and about $8.7 billion in equity, which includes convertible preferred, common shares and common equivalent securities, one of the sources said.

The common stock and securities equivalent to common shares would give AIG about 14 percent ownership in MetLife, while the convertible preferred is expected to be liquidated before it converts, the source said.

With the convertible preferred stock, AIG's stake would go above 20 percent, according to sources.

A deal for the American International Group Inc unit, American Life Insurance Co (Alico), could be announced as soon as Monday, the sources said, declining to be named because it was not yet final.

MetLife's board was meeting on Sunday to weigh the transaction, one source said. AIG's board met Friday and gave the task of final approvals to a special committee, which did so on Sunday, the sources said.

Alico would help MetLife, the largest publicly traded U.S. life insurer, expand its presence in international markets, especially in Japan.

The unit, founded in 1921 and based in Wilmington, Delaware, sells life insurance and retirement products to 19 million customers in 54 countries.

A deal is expected to close by the end of this year, and MetLife estimates it to be accretive by 45 cents per share to 55 cents per share in 2011, excluding one-time costs, one of the sources said.

The deal would be the second major business sale by AIG in a week and will allow the insurer to repay billions it owes to the U.S. government after a September 2008 rescue, which has since swelled to $182.3 billion.

The insurer agreed to sell its Asian life insurance unit, American International Assurance (AIA), to Britain's Prudential Plc

last Monday for $35.5 billion, the largest insurance deal ever.

AIG, which is nearly 80 percent owned by the U.S. government, declined to comment. MetLife was not immediately available for comment.

METLIFE STAKE

The equity component of the purchase price includes about $3 billion in convertible preferred, and the rest in common stock and temporary securities similar to common shares, the sources said.

AIG will hold below 20 percent of MetLife as a result at closing, a stake that is expected to increase to above 20 percent -- but below 25 percent -- later, after MetLife's shareholders approve the conversion of the temporary securities to common stock, these sources said.

But one of the sources said AIG's actual ownership would never go beyond 14 percent because it cannot convert the stock for several years, and it will end up being liquidated before that.

The stake that AIG will get also carries restrictions on voting, the source said.

The shares will be voted in the same proportion as all other MetLife shares on any matter put to a shareholder vote, the source added.

The cash component of the consideration is expected to be used to pay down the $9 billion preferred interest that the Federal Reserve Bank of New York holds in the unit, sources said. The equity will be sold over time to redeem the remaining interest, they said.

A sale comes after months of negotiations and became possible after the New York Fed, advised by Morgan Stanley , agreed in March 2009 to swap its debt into equity in special purpose vehicles that AIG created to hold AIA and Alico.

The Fed's aggressive bet has paid off in spades, allowing AIG, which has been advised by Blackstone Group throughout this process, to get much higher values for the two businesses than it was drawing in the months after the bailout.

Early last year, MetLife had offered about $11 billion for the unit, but the price came up in the months after March 2009, as the Fed's move gave AIG more time to sell these businesses.

The AIA and Alico deals also share some of the other advisers. AIG is being advised by Citigroup Inc and Goldman Sachs on both the deals, while Credit Suisse has been an adviser for both the buyers, according to several sources.

Under the terms of his contract, AIG Chief Executive Robert Benmosche, a former MetLife chief and current shareholder, cannot be involved in AIG's discussions to sell Alico to his former employer.

Benmosche, however, played a major role in negotiations in the AIA deal with Prudential.

(Reporting by Paritosh Bansal; Editing by Diane Craft)

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