Macoto to be acquired by Shinkong

Shinkong Financial Holding Co (新光金控), the nation's seventh largest financial services group by assets, yesterday announced it will acquire Macoto Bank (誠泰銀行) as a 100-percent owned subsidiary through a share-swap deal.

At a board meeting yesterday afternoon, the two parties agreed on a share-swap ratio of one share of Shinkong Financial for 1.1408 shares of Macoto Bank. The share conversion is slated to take place on Oct. 3, Shinkong Financial president Frank Cheng (鄭弘志) told reporters after the board meeting.

The purchase is dependent on shareholder approval. Shinkong's shareholder meeting is on June 10.

Morgan Stanley, the deal's financial consultant, valued each share of Macoto Bank at NT$28.2, with a net value of NT$9.1 billion (US$288.3 million) for Macoto Bank's 80 outlets nationwide, which Cheng said is reasonable.

In total, Shinkong Financial said the merger is priced at NT$20 billion. The inclusion of Macoto Bank will complement the business operations of its banking unit, Shinkong Commercial Bank (新光銀行), Cheng added.

After the merger deal, Shinkong Financial's total assets will surpass NT$1.2 trillion, with the firm remaining the seventh-largest financial services provider among the nation's 14 financial holding companies.

The new banking unit will be renamed Taiwan Shinkong Macoto Commercial Bank (台灣新光誠泰商業銀行), as the nation's financial regulations stipulate that each financial holding company can only operate one bank.

The long-term effect of the merger for Shinkong, which has been seeking to expand its banking business, looks positive, said Chu Yu-chun (朱玉君), a finance sector analyst with SinoPac Securities Corp (建華證券).

"The insurance-based financial holding company can leverage its expanded banking sales channels to market its insurance products, while taking advantage of the firm's extensive insurance sales staff to promote its consumer banking business," Chu said.

However, in the short run, the merger could bring some financial burdens for Shinkong, depending on whether Macoto's asset quality and profitability deserve the deal's share-swap ratio, she said.

Macoto was established 86 years ago as a local credit cooperative. In 1997, it became the first domestic credit cooperative in the nation's history to change its charter to become a commercial bank. Currently, the lender is headed by chairman Lin Cheng-yi (林誠一), with most of its 80 outlets located in northern Taiwan.

Shinkong Financial spokesman Victor Hsu (許澎) yesterday praised the deal, saying it will boost the company's business scale.

After the merger with Macoto, Shinkong Bank's branches will more than triple, expanding from the original 28 branches to 108. With the addition of Macoto's 50 branches in Taipei, this will fill a gap in Shinkong Bank's consumer financial services offering in the north, Hsu said.

Moreover, the company's credit card business will achieve significant economies of scale after combining Shinkong Bank's 0.41 million cardholders and Macoto Bank's 1.15 million cardholders.