The nation's financial holding firms will be able to maneuver with more flexibility when taking over rivals in the future, as the financial regulator yesterday officially announced relaxed merger restrictions in the hope of facilitating further consolid-ation in Taiwan's crowded finance sector.
In addition to a 100 percent share swap, financial holding companies now can acquire their competitors by cash or other assets, including properties and even a third-party's shares, the Financial Supervisory Commission said in a statement released yesterday.
"The commission decided to loosen the regulations, as current practice that allows mergers through share swaps is not only impractical but also obstructive to consolidation," the commission said.
The opening-up helps enhance diversification and gives more merger tools for the nation's financial groups, according to the financial watchdog.
The commission made the ruling against the backdrop of President Chen Shui-bian (陳水扁) vowing to consolidate the nation's finance sector by halving the number of financial holding firms to seven by the end of next year, hoping that the resulting bigger companies can help sharpen Taiwanese financial conglomerates' competitive edge against foreign rivals in the region.
The regulatory relaxation was seemingly welcomed by analysts and financial-services providers. However, it remains questionable whether the opening-up will stimul-ate more merger and acquisition activities next year like the authority expected, they said.
"We are positive about the loosening up that comes back to a free-market mechanism and provides financial groups with more options when buying other financial institutions," said Shirley Yang (楊慶祺), a fund manager who tracks Taiwan's finance sector and helps manage a NT$1.2 billion (US$35.76 million) portfolio at Invesco Taiwan Ltd.
The change is expected to hand cash-rich financial holding firms, like Cathay Financial Holding Co (
Acknowledging the authority's gesture of further liberalization, Cathay Financial's chief strategy officer Lee Chang-ken (李長庚) said that in theory this will make proc-eedings more flexible when firms arrange mergers.
But whether or not this could stimulate consolidation among financial holding firms will mainly depend on their willingness to be taken over, Lee said.
As many as 11 of Taiwan's 14 financial groups said during a legislative session last month that they preferred acquiring others rather than being acquired.
Meanwhile, Cathay Financial will become the first beneficiary of the relaxed rules by simplifying its merger procedure with the Taichung-based Lucky Bank Tai-wan Inc (第七商銀) -- in which Cathay Financial already bought a 81.35 stake in cash -- into its Cathay United Bank (國泰世華銀行) by the middle of next year, accor-ding to the official.
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