Cathay Financial raises US$495m for acquitisions

Cathay Financial Holding Co (國泰金控), the nation's biggest financial services provider, sold US$495 million of stock to overseas investors to help fund acquisitions being sought by the government to create fewer, bigger companies.

Cathay Financial sold 25.49 million global depositary receipts for US$19.40 each, said Jonathan Back, co-head of equity capital markets in Asia for JPMorgan Chase & Co, which arranged the sale. Each GDR represents 10 common shares.

The sale price is equivalent to a 3.8 percent discount to Tuesday's closing price in Taipei of NT$66.50.

On the local bourse, Cathay Financial shares fell NT$1.50, or 2.3 percent, to NT$65 yesterday.

The government wants to halve the number of local financial holding companies in two years to seven to help them compete against foreign rivals such as Citigroup Inc and HSBC Holdings Plc for business.

"The stock issue means Cathay Financial is ready to take action by making an acquisition," said Parker Wu (吳年恭), a fund manager at Shinkong Investment Trust Co (新光投信). "With a lot of cash in hand, Cathay Financial might become one of the first to complete an acquisition."

Cathay Financial, which owns the country's largest life insurer, offers banking, brokerage and insurance services.

The company has repeatedly said it remains interested in acquiring a bank as it tries to expand its branch network and may consider participating in the sale of failed Chung Shing Bank (中興銀行), it said back in August.

Cathay Financial may also target securities brokerages, said Wu, who has used 4 percent of the fund he manages to buy Cathay Financial stock.

The stock sale is equivalent to a 3 percent stake in the company, increasing foreign ownership to 18 percent, Back said in a telephone interview yesterday from Hong Kong.

``The proceeds will be used to prepare for potential consolida-tion,'' Back said, without naming potential acquisition targets.