The scrapping of the nation's first merger between two financial holding companies -- Taishin Financial Holding Co (台新金控) and Shin Kong Financial Holding Co (新光金控) -- was a wise decision, one economist said yesterday.
"The merger plan shouldn't have been implemented just for the sake of consolidation," said economist-turned-lawmaker Thomas Lee (
The merger plan was officially aborted late Wednesday, eight days after its initiation.
Interestingly, the deal was a family affair between two brothers: Taishin Financial's Chairman Thomas Wu (
Thomas Wu decided to scrap the deal after Eugene Wu earlier on Wednesday revised Shin Kong Financial's profit forecast for the year downward, from an initial NT$3.96 billion gain to an after-tax loss of NT$8.82 billion.
Moreover, Shin Kong Life Insurance (
The total market value for the three Shin Kong buildings are estimated to be at least NT$15 billion, according to local Chinese-language newspapers.
Shin Kong Financial's financial problems apparently rattled Taishin Financial's confidence in the merger plan and both companies' stock performance during the past few days, said William Fong (方偉昌), a banking analyst at PrimAsia Securities Co.
"As declining interest rates are hurting Shin Kong Life's ability to pay the higher returns that were guaranteed by policies which were sold earlier, the recent stock development has placed Shin Kong in a disadvantageous situation," Fong said.
Fong said the move to temporarily halt the merger plan is positive for both companies.
"The timing for such a merger may not be ripe yet. Both of them need to think about the planned merger one more time," Fong said.
Shares of Taishin Financial and Shin Kong Financial rose slightly yesterday by NT$0.4 and NT$0.3 to close at NT$17.9 and NT$14.6, respectively, signaling investors' positive reaction to the decision.
A Shin Kong Financial official said yesterday that the company wants to continue communicating with Taishin about the merger plan.
"There may still be room for cooperation. We'll make the final decision that is in the best interests of the shareholders," Shin Kong spokesman Lu Jung (
But Taishin was pessimistic about Shin Kong's sale of properties, saying the return may not cover losses, considering the current sluggish state of the real estate market.
The local media had therefore speculated that the merger plan was dead in the water since both sides disagreed on several issues.
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