CTBC Financial Holding Co (中信金), the nation’s third-largest financial service provider by assets, has won the priority rights to negotiate the acquisition of Taiwan Life Insurance Co (台壽), local media reports said.
The deal, to be carried out through a share swap scheme, may be settled as early as today, if the two sides can come to an agreement about boardroom representation, employee benefits and other details, the reports said, after CTBC agreed to allow Taiwan Life to be the surviving entity.
CTBC Financial outbid Waterland Financial Holding Co (國票金) on Monday last week by offering to pay Taiwan Life NT$27 per share, higher than the NT$25 per share offered by Waterland Financial, the reports said, without citing sources.
The winning bidder proposed trading each Taiwan Life share for about one-and-a-half CTBC Financial shares, while Waterland Financial offered to exchange individual Taiwan Life shares for two-and-a-half shares, the reports said.
Taiwan Life stands to gain an 8 percent premium by choosing CTBC, whose shares closed at NT$19.85 on Friday, compared with NT$10.1 for Waterland Financial that left virtually no premium based on Taiwan Stock Exchange data.
The figures suggest the deal would value about NT$24 billion (US$812.68 million), reports said.
Taiwan Life Insurance chairman Chu Ping-yu (朱炳昱) in June announced the plans to find a buyer, adding that the firm would prefer a financial holding company, after shareholders Long Bon International Co (龍邦), a Greater Taichung-based hotel service provider, and state-owned Bank of Taiwan (台灣銀行) expressed a preference to be investors rather than operators.
However, the insurer has insisted on retaining its moniker due to contractual obligations and other concerns, Chu said.
The prospective buyer must also be able to guarantee it will protect the rights of Taiwan Life employees and policyholders as well as demonstrate an ability to provide good returns, Chu added.
Taiwan Life employs 3,700 sales agents.
The insurer has NT$400 billion in investment funds, of which about NT$20.9 billion in real-estate properties, leaving ample room before hitting the 30 percent investment ceiling, company data showed.
The macro-environment has made it increasingly difficult for life insurers to thrive without the backing of other financial affiliates, Chu said.
If all proceeds as planned, Taiwan Life would become the third insurer CTBC Financial acquires in two years after the local unit of US Met Life Inc in 2011 and the Taiwanese branch of Canada’s Manulife International Ltd in July.
The Financial Supervisory Commission has yet to approve the Manulife buyout.
As of December last year, Taiwan Life has an embedded value of NT$44.6 per share, but its net value may have taken a hit last quarter due to uncertainty over the US quantitative easing policy, analysts said.