While reports about Fubon Financial Holding Co's (富邦金控) investment in rival Chinatrust Financial Holding Co (中國信託金控) stirred acquisition speculation last week, market watchers said Fubon is unlikely to pursue a hostile takeover of the company.
Senior management at Fubon Financial have a realistic appreciation of the value of Chinatrust Financial, Credit Suisse analyst Sherry Lin (
A hostile takeover is likely to drive away the solid management team at Chinatrust Financial, which Fubon Financial respects, Lin said.
PHOTO: AP
The Chinese-language Commercial Times reported last week that Fubon Financial has bought more than 100 million shares for more than NT$1 billion (US$30.69 million) through its insurance unit Fubon Life Assurance Co (富邦人壽), which sparked takeover speculation in the market.
In response, Fubon Financial said that it had been pursuing a purely financial investment, while Chinatrust Financial said the rival had only acquired a 2 percent stake. To reach the 5 percent limit of an insurer's working capital stipulated by regulators as the point where a merger bid is underway, Fubon would have to fork out more than NT$10 billion.
While suggesting that a take-over of Chinatrust Financial may be premature, Fubon Financial's move testifies to widespread market interest in the company, which enjoys a productive franchise and improving prospects. The interest comes despite the investigations into the Koo family, the founding and largest shareholder, for its disputed takeover bid on Mega Financial Holding Co (
The investigations could also trigger Chinatrust Financial to expedite its plan to seek a friendly strategic investor, she added.
Chinatrust Financial is reputed to be in talks with Goldman Sachs for a possible alliance but the company has denied the reports.
Credit Suisse maintained its outperform rating on Chinatrust Financial in spite of raised loss estimate of NT$0.84 per share from NT$0.13 for this year and a 16 percent reduction in earnings estimate for next year to NT$1.58 per share, considering the company's plan to book an extra NT$4 billion to NT$5 billion to cover restructuring.
The target share price for the next 12 months was trimmed down to NT$33.3 from NT$34 accordingly, the research note said.
Pandora Lee (
There are no imminent threats to trigger instant expansion demand as none of the big players have doubled their size overnight through takeover thus far, Lee said.
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