A Carlyle Group-led consortium agreed yesterday to invest NT$21.5 billion (US$656 million) to acquire a 36.9 percent stake in Ta Chong Bank (
Carlyle's offer was NT$17 per share, Ta Chong spokesman James Chiou (邱正光) said in a telephone interview. This represented an approximately 117 percent premium on the bank's book value of NT$7.84 per share as of the first half.
Ta Chong shares gained 0.45 percent to close at NT$12.45 on the Taiwan Stock Exchange yesterday.
Under the deal, the consortium will obtain seven of 13 board seats, including two independent directors.
"The consortium that offered the best price will become our single largest shareholder," Chiou said.
The bank hoped to receive funds by the end of September to boost its capital adequacy ratio to 12 percent from 8.96 percent as of April, Chiou said.
The lender will use the money to deal with the lingering bad loans, he said.
The investment by the US buyout firm came at a time when a group of troubled small lenders in Taiwan were seeking fresh funds to relieve financial difficulties following the consumer credit abuse crisis.
Ta Chong, the nation's fifth-biggest cash card issuer by lending balance, remained in the red by NT$206 million for the first five months of this year, following a deficit of NT$4.98 billion, or minus NT$2.63 per share, last year.
"We are positive the deal will result in a big change in shareholding structure," Mega Securities Co (
"But the larger-than-expected investment scale will balloon the company's capitalization and in turn dent profitability," Uang said.
Narrowing margins and contracting unsecured lending business and the cleanup of bad loan assets will continue to impact on the lender's profit outlook this year, she said.
Mega Securities expected Ta Chong to incur a loss of NT$869 million, or minus NT$0.47 per share, this year.
The deal was the second foreign private equity investment in Taiwan's capital-strapped small banks within a month.
Last month, Longreach Group, founded by a former UBS AG investment banker, agreed to buy a 51 percent stake in debt-ridden EnTie Commercial Bank (
Carlyle will subscribe for 588 million common shares, 235 million preferred shares and convertible bonds worth NT$7.5 billion issued by Ta Chong, the bank said in a filing to the TSE yesterday.
The Financial Supervisory Commission said it was amenable to increasing private equity investment in the nation's banks.
The regulator said it had not received related applications from the parties but would conduct a review of investors' qualifications once they control more than 15 percent of a local bank.
Looking to the future, Chiou said the bank hopes to work with its strategic partner in developing an investment banking business and expand its overseas footprints in Hong Kong and Vietnam.
Ta Chong has one finance company in Hong Kong.
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