Shares of Shin Kong Financial Holding Co (
Shin Kong Financial shares fluctuated in 3.09 percent range before closing unchanged at NT$35.60 (US$1.1) on the Taiwan Stock Exchange yesterday. MasterLink shares gained 1.59 percent to close at NT$12.80 in the meantime.
`Positive'
"We are positive about the deal, as Shin Kong Financial is expected to develop a balanced business lineup through the investment," Chu Yu-chun (朱玉君), an analyst who tracks the financial sector at SinoPac Securities Corp (建華證券), said in a phone interview yesterday.
Shin Kong Financial on Tuesday announced a plan to acquire a 16 percent stake in MasterLink for about NT$3 billion, or less than the brokerage's book value of NT$13.6 per share, on the open market within the next 12 months.
MasterLink is the nation's ninth-biggest brokerage with a market share of 3.72 percent, according to SinoPac Securities data.
The partnership could help strengthen the company's securities business, after the insurance-centric financial group's effort to expand its banking arm by acquiring Macoto Bank (
Shin Kong Financial controls Shin Kong Life Insurance Co (
"The planned alliance is a mutually beneficial partnership to boost both parties' profits and cross-selling effects," Shin Kong Financial spokesman Victor Hsu (
Shin Kong financial expected a return of 6 percent per annum from the investment, he said.
The partnership allows MasterLink access to the financial group's resources and banking channels while the brokerage's underwriting expertise and overseas outlets in Hong Kong and Shenzhen, China, can help Shin Kong Financial expand abroad, Hsu added.
The executive remained tightlipped about an ultimate acquisition of the securities house, saying that this would depend on how the partnership works over the next couple of years.
Shin Kong Financial said it would tender its application to the Financial Supervisory Commission for approval of the investment plan tomorrow.
In response, MasterLink said it welcomed the investment with an open attitude, as long as the partnership benefits its shareholders, profitability, and employees, and that "a merger can be discussed and there is unlimited possibility of further cooperation."
Takeover
It is only 4 percent short of the figure Shin Kong Financial would need to meet the required shareholding of 25 percent for a takeover, as Shin Kong Life already controls a 4.99 percent stake in MasterLink, according to the brokerage's figures.
However, to achieve this goal, Shin Kong Financial would have to compete with a group of potential rivals, including Fubon Financial Holding Co (
Meanwhile, SinoPac Securities did not recommend Shin Kong Financial, which has met a target price of NT$35 under a widening banking loss, while appearing positive about MasterLink with a target price of NT$17.
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