Taiwan Ratings Corp (中華信評), a local arm of Standard and Poor's rating services, reaffirmed its credit rating on China Development Financial Holding Corp (CDFH, 中華開發金控) after the financial group announced plans to boost its stake in Taiwan International Securities Corp (
Taiwan Ratings reaffirmed its `twA+' and `twA-2' long-term and short-term counterparty credit ratings on China Development Financial with a stable outlook, the ratings services firm said on Monday.
"The planned stake increase is not expected to have a significant impact on the credit profile of the China Development Financial group, which is stronger than that of Taiwan International Secur-ities," the ratings agency said in a statement.
Financial strength
With a net worth of NT$128 billion (US$3.94 billion) and a double leverage ratio of about 109 percent as of the end of September last year, the financial group has sufficient financial strength to absorb Taiwan International Securities, a mid-sized securities firm that has a net worth of about NT$8.2 billion and a brokerage market share of about 1.8 percent at the same time, the statement read.
Meanwhile, Macquarie Securities retained its `outperform' rating on China Development Financial, implying a return exceeding 10 percent, with a target price of NT$13.93, according to the Australian brokerage's report released yesterday.
If the financial holding firm succeeds, this would be the first case of a true hostile takeover among Taiwan's financials. The move is viewed as a test case for Taiwan's regulatory environment and an interesting precedent for other brokers, Macquarie said.
CDFH, which already has a 36.44 percent stake in Taiwan International Securities, said last Friday it would buy as many as 133 million shares of the brokerage through a tender offer of NT$14 apiece from Feb. 19 to March 1.
The purchase would cost China Development about NT$1.86 billion based on the offer price.
Shareholding boost
China Development Financial's shareholding will be diluted to some 27 percent after Taiwan International Securities merges with smaller rivals First Securities Co (
However, the planned stake increase will boost the financial group's shareholding to a maximum of 40 percent in the merged entity, the company said.
To counter the hostile takeover attempt, Taiwan International Securities urged its shareholders not to respond to China Development Financial's offer and put forth the signatures of 1,200 employees against the proposed takeover, the brokerage said in its filing to the Taiwan Stock Exchange on Monday.
Taiwan International Securities formed a strategic alliance last week with Legacy Partners Group of the US to counteract China Development Financial's aggressive bid.
China Development Financial's share price yesterday fell 0.8 percent to NT$12.35 on the Taiwan Stock Exchange. Taiwan International Securities' stock also ended lower, slipping by 0.7 percent to NT$14.05.
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