Fubon Financial Holding Co (富邦金控), the country's second-largest financial services provider, is expected to gain approval to merge with Hong Kong's International Bank of Asia (港基銀行) from Hong Kong authorities today.
Last September, Fubon Financial signed an agreement to buy Arab Banking Crop's 55 percent stake in the International Bank of Asia. The two parties were set to conclude the merger in December, but delayed the timetable as the two governments disagreed over supervision details.
"We are optimistic about the ruling," Fubon Group chairman Richard Tsai (
Fubon is hoping to use the merger to enter the China market under the terms of the recently enacted Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China.
The CEPA, which was concluded last June and took effect last month, enables 17 of Hong Kong's service industries, including banking, to independently open businesses in China.
If Fubon Financial's plan is successful, it might be the first Taiwanese bank to operate in China.
Fubon Financial offered HK$3.68 per share to acquire the bank, making the merger a HK$4.31 billion (US$554 million) deal. Shares of International Bank of Asia closed at HK$3.675 in Hong Kong yesterday, unchanged from last week.
However, a cross-strait financial expert said that even if Fubon acquires the Hong Kong bank, it may not able to take advantage of CEPA.
"Although CEPA relaxes requirements for Hong Kong banks, applicants still need to get permits from the People's Bank of China" (
"CEPA gives Hong Kong players the qualifications to play, but that doesn't mean they will win the trophy," Chang said.
Although Hong Kong companies had high hopes of business opportunities that the CEPA would bring, most have stayed on the sidelines since the pact took effect, Chang said.
As of the end of last week, 109 service companies had applied for certificates to open businesses in China and 58 applications were approved by the territory's Trade and Industry Department, according to department statistics.
Chang attributed the lukewarm response to the absence of supporting measures, which means local governments in China have no guidelines to follow for processing applications from Hong Kong companies.
Tight requirements and a great deal of red tape have further dampened Hong Kong investors' interest, Chang added.
"I think the confusion will take one to two years to resolve," Chang said. "By that time, Hong Kong companies will lose their edge since China has promised to open its service sector to all foreign investors by 2005."
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