Sat, Jun 16, 2007 - Page 12 News List

Longreach set to take control of EnTie

FOREIGN TAKEOVER Longreach Group currently manages assets worth US$750 million in Asia, with investors that include UBS AG, Merrill Lynch, Orix Group and NEC

By Amber Chung  /  STAFF REPORTER

Capital strapped EnTie Commercial Bank (安泰銀行) announced yesterday that it has agreed to sell as much as a 51 percent stake to private equity firm Longreach Group for NT$18.8 billion (US$567 million) in a private placement whereby the local lender would become a foreign-owned bank.

Through the deal, Longreach would acquire 1.36 million newly issued common shares and 622 million convertible perpetual preferred shares at NT$9.50 per share. The buyout firm also agreed to buy 442 million shares at a later date.

The transaction would be completed by the end of the third quarter. The fresh capital will be injected into EnTie by the end of October at the latest, the bank said.

"We will use the funds to address mounting bad loans and improve the bank's financial profile," EnTie chairman Paul Chiu (邱正雄) said yesterday.

Longreach would control five seats on the local lender's board of nine and have the right to appoint its own senior management. The two parties remained tightlipped as to whether Chiu would stay on as chairman.

"We [Longreach] have been looking for investment opportunities in Taiwan for years," Longreach chairman and partner Mark Chiba told the Taipei Times yesterday.

The private equity firm likes investment targets that are not too big or too small. They want a controlling stake in a strategic partnership with the existing management rather than 100 percent control, Chiba said, adding that EnTie fitted that profile.

The buyout firm's next move is to invest in the nation's high-tech industry, Chiba said, but declined to elaborate further.

Longreach, founded by Chiba -- who was a former chief executive of UBS Securities Japan -- and other seasoned investment bankers in 2003, currently manages assets worth US$750 million in Asia, with investors that include UBS AG, Merrill Lynch, Orix Group and NEC.

For the first four months of this year, EnTie incurred a loss of NT$2.77 billion, following a loss of NT$5.94 billion last year, due to its high-risk balance transfer business amid the industry-wide consumer credit abuse storm.

EnTie has an unamortized loss exceeding NT$13 billion incurred from the sale of bad debts, while the passage of the personal bankruptcy law last week could mean a mounting default problem will resurface in the future.

"Longreach's offer will fully cover the potential impact on EnTie from the new regulations," said Kenneth Tung (董凱鐿), a director at Citigroup Global Markets Asia Ltd, which advised the buyout firm in the transaction, shying away from giving the estimates.

Meanwhile, EnTie’s former major shareholder Hung Tai Group (宏泰集團)

agreed to subscribe for convertible bonds worth NT$11 billion and convert

them at NT$19 per share when the scale of bad loans exceed previous

estimates, the financial advisory agency said. EnTie closed nearly

seven-percent limit-up to NT$8.36 in the Taiwan Stock Exchange yesterday.

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