SinoPac to sell stake to ICBC in private offering

CROSS-STRAIT FINANCE::If approved by regulatory authorities, the SinoPac deal would be the first Chinese capital investment in a Taiwanese financial institution

By Kevin Chen  /  Staff reporter

Wed, Apr 03, 2013 - Page 14

SinoPac Financial Holdings Co (永豐金控) yesterday announced that it or its banking subsidiary, Bank SinoPac (永豐銀行), would sell shares to the Industrial and Commercial Bank of China Ltd (ICBC, 中國工商銀行) via a private placement.

The announcement came shortly after cross-strait banking regulators on Monday reached new investment agreements allowing Chinese financial institutions to acquire a higher stake in their Taiwanese counterparts.

If approved by regulators on both sides, the SinoPac deal would be the first Chinese capital investment in a Taiwanese financial institution.

In their separate filings to the Taiwan Stock Exchange, SinoPac Financial and Bank SinoPac said their boards had approved plans to issue new shares to ICBC through a private placement.

The companies said they planned to used the proceeds to strengthen their working capital, develop cross-strait financial services and enhance their international competitiveness.

SinoPac Financial spokesman Michael Chang (張晉源) yesterday said the companies would sign subscription agreements with ICBC to allow China’s biggest commercial bank to acquire no more than 1.8 billion new shares in either SinoPac Financial or Bank SinoPac.

Under the agreements reached between Taiwan’s Financial Supervisory Commission and the China Banking Regulatory Commission on Monday, Chinese lenders can choose to invest in Taiwanese financial holding companies or their banking units, but not both.

The relaxed rules allow Chinese lenders to buy up to 10 percent of a listed Taiwanese financial holding company, up to 15 percent of an unlisted financial holding company and 20 percent of a banking subsidiary of a listed Taiwanese financial holding company.

In SinoPac’s case, ICBC could acquire up to 10 percent of SinoPac Financial or up to 20 percent of Bank SinoPac.

The companies did not disclose how much they plan to raise from the private placement. Based on SinoPac Financial’s closing price of NT$14.30 yesterday, the sale could raise as much as NT$25.74 billion (US$860.3 million).

The companies said the final price could differ depending on their net value per share when they report their first-half results later this year.

Any party involved in the private placement can cancel the deal if the transaction is not completed within one year of signing of the subscription agreement, according to the companies.

Like SinoPac Financial, other non-state-run financial holding companies are expected to attract more attention from their Chinese counterparts, as Minister of Finance Chang Sheng-ford (張盛和) said on Monday the government had no intention of selling its stakes in eight government-owned banks to any Chinese investors.

Goldman Sachs said in a note yesterday it expected Chinese lenders would likely sit on their Taiwanese counterparts’ board, given the higher stakes they can have in the Taiwanese companies once the new rules are approved by the governments across the Taiwan Strait.