Wed, Jun 28, 2017 - Page 12 News List

FSC awaiting clarification from SinoPac on unit sale

INTERNAL OPPOSITION:Market observers have said a group of company managers has raised doubts about the sale and tipped off regulators and media outlets

By Ted Chen  /  Staff reporter

The Financial Supervisory Commission (FSC) yesterday said that it is still waiting for SinoPac Financial Holding Co (永豐金控) to clarify its plans to sell off a US-based banking subsidiary, amid rumors of brewing internal strife at the embattled company.

SinoPac Financial has made little progress on its plans to sell subsidiary Far East National Bank (美國遠東國民銀行) to NASDAQ-listed Cathay General Bancorp (國泰萬通金控) as it has been unable to address the commission’s concerns, such as pricing and asset information related to the US$353 million deal that would net the company about NT$2 billion (US$65.92 million) in profit.

With the deal quickly reaching its expiration date at the end of this month, SinoPac Financial was able to avert severe breach of contract penalties by negotiating an extension to Sept. 20.

SinoPac Financial has been slow in responding to requests for clarification, the commission said, adding that its responses in successive follow-up filings during the review period were inadequate.

Market observers have said that a faction of company managers opposed to former SinoPac Financial chairman Ho Shou-chuan (何壽川) contributed to the impasse by submitting tip-offs to regulators and media outlets.

The faction had questioned the US$353 million sale price, as Far East National Bank was valued by reputable investment banks at about US$400 million, they added.

In addition, the terms of the sale did not factor in an estimated US$30 million in deferred tax credits, which could expose SinoPac Financial to a loss of NT$1 billion, market observers have said, adding that the deal could have been the reason behind the sudden departure of SinoPac Financial chairman Paul Chiu (邱正雄), who is to resign on Friday.

SinoPac Financial has been left in a bind by the internal strife, as selling the subsidiary would expose it to corporate governance violations, such as breach of trust, while pulling out of the deal would result in heavy penalties for failing to meet contract terms, market observers have said, adding that the commission could also face legal action from the US-based buyer.

SinoPac Financial has not shown urgency in completing the sale after receiving the three-month extension, the commission said.

The regulator reiterated that approval would be contingent on the company providing the missing information.

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