Mega may drop Taiwan Business Bank acquisition plan

Mega Financial Holding Co (兆豐金控), the nation's third-largest financial group by assets, is considering calling a halt to its plan to acquire smaller rival Taiwan Business Bank (台灣企銀) as the merger might bring little synergy.

"We are waiting for the Ministry of Finance's indication on whether or not to proceed with the merger," Mega Financial spokesman Simon Dzeng (曾垂紀) said in a telephone interview yesterday.

Dzeng downplayed reports that it planned to dispose of its current stake in Taiwan Business bank, saying the final decision rests with the finance ministry.

The Chinese-language Economic Daily News reported yesterday that the financial holding firm planned to offload its 14-percent stake in the bank and had notified the ministry of its decision.

State-controlled Mega Financial announced in late 2005 that it planned to buy up to 26 percent in the state bank for NT$10 billion (US$303 million), or around NT$9 per share, within the following year.

The investment plan was part of the government's second-stage financial reform, which had set a target of halving the number of state-run banks to six by the end of 2005 to consolidate the nation's banking sector. Progress has slowed, however, following several public protests and opposition to the plan.

Mega Financial's shareholding in the bank has stayed at around 14 percent for months without any signs of rising.

The financial group submitted its report to the ministry on its holdings in Taiwan Business last month and a final decision could be made soon, Dzeng added.

Opposition from labor unions on both sides against the potential merger and Taiwan Business' less-than-ideal asset quality have deterred Mega Financial from stepping up its shareholding from the current 14 percent, the executive said.

If the government agrees to halt the merger, it would be the first among the proposed mergers included in the second-stage of financial reforms to fall through.

Deputy Minister of Finance Liu Teng-cheng (劉燈城) said the ministry has yet to receive Mega Financial's report of a change in plans.

"We'll decide [what to do] after getting the report," he said during a telephone interview.

The government owns more than 30 percent of Taiwan Business Bank, including shareholding controlled by Mega Financial, making it the bank's biggest shareholder. If Mega Financial offloads its shareholding, the new buyer will become the small bank's second-largest shareholder.

In retrospect, Mega Financial has not been very active in pushing the merger, as a company executive admitted last July that the financial holding firm had put its investment on hold out of concern that Taiwan Business Bank's NT$15 billion in bad debts would put a dent on the financial group's profitability.

A Chinese-language report at that time said Mega Financial could dispose of its 14.38 percent stake in Taiwan Business Bank to overseas private equity funds or other potential strategic investors.

Additional reporting by Amber Chung