KGI Securities Co (凱基證券) jumped by the daily limit yesterday after China Development Financial Holding Co (中華開發金控) announced plans to acquire the nation’s second-largest brokerage on the open market at a generous premium.
KGI’s share price rose 6.58 percent to NT$12.15, while China Development Financial’s share price advanced 4.67 percent to NT$8.74, well above the TAIEX’s 0.87 percent gain, Taiwan Stock Exchange data showed.
China Development Financial, which last year lost a bid for Polaris Securities Co (寶來證券) to Yuanta Financial Holding Co (元大金控), said the acquisition would fall in line with the company’s plans to expand in Taiwan and China.
“We aim to make KGI Securities a 100 percent subsidiary and integrate it with another fully owned brokerage, Grand Cathay Securities Corp (大華證券),” China Development Financial president Paul Yang (楊文鈞) said on Thursday night.
China Development Financial hopes to begin the acquisition next month once the Financial Supervisory Commission gives the green light, Yang said.
The deal could become the largest buyout involving brokerages in Taiwan if China Development Financial acquires 100 percent of KGI at NT$16.71 per share, 33 percent higher than KGI’s 20-day average, Yang said.
“The offer is not unreasonably high in light of market-share gains, synergy benefits and future development potential,” he said.
The acquisition would give China Development Financial leadership in the underwriting business and second place in terms of brokerage services, with 112 outlets nationwide.
China Development Financial chairman Chen Mu-tsai (陳木在) and Grand Cathay Securities chairman Hsu Daw-yi (許道義) paid a personal visit to KGI on Thursday evening to present the buyout, local media said.
KGI welcomed the courtship after Polaris Securities’ integration with Yuanta Securities, the nation’s largest brokerage, local media said.
China Development Financial intends to finance the acquisition with proceeds from a NT$16 billion (US$542.74 million) capital reduction, as well as issue new shares, Yang said.
The company, although a poor performer last year in terms of earnings, is flush with capital, which should rise to NT$150 billion after restructuring, from the current NT$112.4 billion, Yang said.
That would boost its capital adequacy ratio to 21.17 percent, much higher than the 10 percent required, Yang said, adding China Development Financial is interested in making additional acquisitions.