The nation's finance industry is likely to see a batch of mergers and acquisitions (M&As) next year, as foreign strategic investors are interested in investing in the local financial sector, investment bankers said yesterday.
"A lot of conversation is going on and lots of people are thinking seriously," Matthew Ginsburg, head of the financial institutions group at Morgan Stanley Asia, said in Taipei yesterday.
Ginsburg said a group of foreign financial institutions from Europe, the US and Asia have over the past six to nine months expressed interest in acquiring their local counterparts. He declined to elaborate further.
Each merger deal could have significant transaction value.
"[One deal could amount to] several hundred million US dollars," said Willard McLane, executive director of Morgan Stanley's financial institution group.
The nation's financial regulators have been encouraging consolidation of the overcrowded banking sector. They have openly invited foreign investors to help trim the number of state-owned banks down to six from 12 by the end of next year, and halve the number of financial holding companies to seven by the end of 2006.
Domestically, Chinatrust Financial Holding Co (中信金控), Fubon Financial Holding Co (富邦金控) and five other financial institutions are bidding to acquire the debt-ridden Chung Shing Bank (中興銀行), according to the Central Deposit Insurance Corp (中央存保), which will announce the result of the bidding on Dec. 9.
Foreign investors, however, appear to have less of an appetite for state-owned financial institutions.
Ginsburg said most foreign strategic investors are private financial institutions that prefer private and modern local financial institutions.
Foreign strategic investors want not only passive investment, the "overwhelming majority of them want to have control [of invested companies]," he said. He cited Taiwan as an ideal investment destination for foreign finance institutions, noting its strong economy, affluent population and human capital, and the lack of large competitors within the finance sector.
Taiwan is one of the few countries in the region offering foreign investors acquisitions on the scale of US$2 billion or US$3 billion, Ginsburg said.
He declined to comment on whether Standard & Poor's (S&P) downgrade of its sovereign outlook on Taiwan to negative on Tuesday would have a negative influence on foreign investment.