The Financial Supervisory Commission yesterday approved Mega Financial Holding Co's (兆豐金控) investment plan of buying Taiwan Business Bank (台灣企銀) shares in cash within the next year. The state-controlled financial service provider announced last Friday that it intended to buy a 26 percent stake in Taiwan Business Bank for NT$10 billion, or no more than NT$9 per share.
"We have approved the investment plan. Mega Financial can acquire Taiwan Business Bank's shares in a variety of ways, including in the open market, through tender offer or from shareholders," a commission spokesman, Lin Chung-cheng (林忠正), told reporters yesterday.
Through the proposed investment, Mega Financial, the nation's second-largest financial group by assets, is expected to benefit from better economies of scale in light of Taiwan Business Bank' significant number of branches nationwide, and the small and medium-clients lineups that is complementary to the fin-ancial group's existing banking units, Lin said.
Whether or not Mega Financial can complete its investment plan is another story, Lin said, adding that the granted period can be extended if they lodge application with convincing reasons.
Taiwan Ratings Corp (
Taiwan Ratings said it will maintain a "stable" outlook on Mega Financial and may revise its "stable" outlook on Taiwan Business to "positive" if Mega demonstrates strong commitment to the merger and the transaction proceeds smoothly to reflect support from the strong Mega group.
The impact of the proposed acquisition on Mega Financial is limited at this stage, as the cost is equivalent to about 5 percent of the company's long-term investments or shareholders' equity as of the end of September this year, Taiwan Ratings said.
Over the medium term, Mega Financial's risk profile would be pressured if it were to fully acquire the debt-ridden bank. Taiwan Ratings will pay close attention to the method it selects to finance the deal, as overly aggressive
financing could impact the financial group's credit profile, the ratings service firm warned.
Being bearish about the deal, BNP Paribas Securities (Taiwan) Co expected the proposed acquisition to fail because of legislative objection, the securities house said on Monday.
Shares of Mega Financial dropped NT$0.55, or 2.27 percent, to NT$21.55 on the Taiwan Stock Exchange. BNP Paribas downgraded Mega Financial shares to “hold” with a downward revised target price of NT$21.2.
Plans to privatize Taiwan Business Bank were scrapped in September after workers protested against possible job losses. The lender's shares were unchanged at NT$8.59 yesterday.
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