CTBC Financial Holding Co’s (中信金控) plan to acquire Taiwan Life Insurance Co (台灣人壽) may fall apart, despite an extended deadline, because the two sides have yet to agree on the date for share swaps and time is running out.
“We will respect and accept the outcome if the deal does not pan out,” CTBC president Daniel Wu (吳一揆) told reporters before an investors’ conference in Taipei.
Wu nodded his head when asked if the company is pessimistic about the buyout attempt.
Taiwan Life, which inked a deal with CTBC Financial last year to join the conglomerate through a share swap scheme, is to call a board meeting tomorrow on whether to put the matter to a vote before the annual shareholders’ meeting on June 16.
Long Bon International Co (龍邦), a Greater Taichung-based hotel service provider and the largest shareholder in Taiwan Life, has made known its intention to thwart the deal, using its influence over the board and shareholders.
Long Bon controls four seats on Taiwan Life’s 10-member board. State-owned Bank of Taiwan (台銀) holds three seats and has voiced support for the merger, leaving three independent directors a decisive say on the issue.
The acquisition is bound to miss the deadline of June 30 for carrying out the share swap if Taiwan Life insists on a vote by shareholders as it will take more than a month to delist the 67-year-old insurer, Wu said.
Taiwan Life’s board, which failed to reach a consensus last week, is scheduled to meet again tomorrow, at Long Bon’s request.
Long Bon reportedly favors a more generous suitor from Macau who is eyeing China’s insurance market and who is planning to use Taiwan Life’s joint venture in Xiamen, in China’s Fujian Province, as a launch pad.
Wu called on the two sides to press ahead with the integration, but said that Taiwan Life has yet to agree on when to trade shares. Under the agreement struck last year, each share in Taiwan Life may trade 1.44 shares in CTBC Financial.
Ratings agencies have placed CTBC Financial on “credit watch” lists on concern the acquisition would burden the buyer’s capitalization that has showed a trend of decline over past quarters.
CTBC Financial spokeswoman Rachael Kao (高麗雪) attributed the decline to a series of acquisitions, but said the group remains healthy in terms of capital adequacy.
The recent depreciation of the yuan dealt a blow to corporate customers at its main subsidiary CTBC Bank (中信銀), sinking the income from its treasury market unit or known as TMU to NT$230 million (US$7.62 million) in March, from NT$900 million in January, Kao said.
CTBC Bank is the top player in TMU business, accounting for 12 percent of the local market.
TMU operations are likely to rebound this year, but the yuan remains a popular investment tool, Kao said.
Separately, the Fair Trade Commission yesterday said it had approved an application filed by China Development Financial Holding Corp (中華開發金控) to acquire mid-sized Cosmos Bank (萬泰銀行).
The commission said the green light was issued after it concluded that the acquisition was unlikely to hamper competition in the domestic banking sector.
China Development Financial announced in February that it would bring Cosmos Bank fully under its corporate umbrella for about NT$15.14 per share in a bid to extend its reach into the commercial banking sector. The company expects the transaction to be completed by the end of July.
Additional reporting by CNA
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