Cathay Financial makes offer to buy rest of Lucky Bank

Cathay Financial Holding Co (國泰金控), Taiwan's top financial group, started the second stage in its planned acquisition of smaller lender Lucky Bank (第七商業銀行) yesterday by offering to buy the remaining 69-percent stake in the bank with an offer of NT$16 (US$0.50) per share.

"Our hope is to buy 100 percent of the bank," said Lee Chang-ken (李長庚), Cathay's chief strategic officer.

The financial-services provider paid NT$1.59 billion last month to acquire a 31-percent stake, or nearly 99.52 million shares, of Lucky Bank, based in Taichung, with 32 branches nationwide.

Cathay will have to fork out a total of NT$5 billion to take over the bank.

Cathay's offer to Lucky Bank's shareholders will be effective from July 15 to 29, Lee said.

However, even if Cathay is successful in buying all remaining shares of Lucky Bank, it would not be a very large asset. Had Cathay owned it last year, it would have contributed only about 1.6 percent of the firm's net income, according to a recent report by Nomura International.

Cathay wants to beef up its banking unit, which now accounts for far more earnings than its former core unit, Cathay Life Insurance Co (國泰人壽), the nation's top life insurer. It raised US$495 million for a possible bank acquisition last year.

However, Cathay United Bank (國泰世華銀行) only commands about a 4 percent share of Taiwan's banking market.

After the acquisition deal is finalized, the holding company's banking branches will be boosted from the current 108 to 140, becoming the fifth-largest banking institution in the nation. The combined asset will be close to NT$1.2 trillion.

Lee said the company will wait for an appropriate time to merge Cathay United Bank and Lucky Bank.

Cathay's shares rose NT$0.50 to close at NT$62.70 on the Taiwan Stock Exchange yesterday. Lucky is not listed on the local bourse.