The government faces a dilemma over foreign buyout firms. It welcomes the injection of foreign funds to boost the economy and enhance competitiveness, but fears the possible side effects.
Over the past two decades or so, these private equity funds have been crucial in corporate finance and restructuring worldwide. At the same time they have been labeled "vulture funds" for the excessive profits they made.
Private equities had not really targeted Taiwan until recently -- when several of them looked into banks and cable TV networks and saw an opportunity for potential, since the government had been trying to consolidate the financial sector and was pushing the move from analog to digital TV.
But buyout firms may experience a dramatically changed environment in Taiwan this year, as sales of billions of dollars in local equity have prompted a debate over whether foreign funds are touching upon a most sensitive nerve -- cross-strait policy. Do they pose a shock to the system? Or are they simply not paying enough?
Last week, the government's prolonged review of the application by a Carlyle Group-led consortium to buy Advanced Semiconductor Engineering Inc (ASE) prompted concern from the US-Taiwan Business Council. It warned that Taiwan could lose its attractiveness to foreign funds.
Concerned that Carlyle may consider taking ASE private -- and that other Taiwanese high-tech firms could follow suit to circumvent the bans on China-bound investment -- the Ministry of Economic Affairs has proposed amending the regulations on company buyouts. According to the ministry's preliminary proposal, a thorough examination of buyout firms' applications would be required if they are purchasing up to a 25 percent stake in a local listed company or in firms in the banking, broadcasting and telecommunications sectors.
The National Communications Commission actually took the first step of looking at buyouts more rigorously when it conducted a face-to-face interview with MBK Partners executives last Friday over the firm's proposed investment in China Network Systems Co (CNS), the nation's second-largest cable TV provider. The commission wants to know whether MBK would own more than the 60 percent limit for overseas investors through its indirect holdings in CNS. The commission said the interview, along with its demand for MBK to submit more documentation on the planned acquisition, was to ensure the foreign ownership rules set forth in the Cable Radio and Television Law (
The Carlyle Group, in comparison, was lucky. It did not need an interview last July over its bid for a 59.29-percent stake in Eastern Multimedia Co. The Macquarie Media Group's purchase of Taiwan Broadband Communications (TBC) from Carlyle in December 2005 also met with little regulatory screening except some paper work.
Against this backdrop, one has to wonder what caused the government's shift in attitude? Is Taiwan moving to build a firewall against private equities, as South Korea appears to have done with its probes into Lone Star and other foreign buyout firms for alleged irregularities, or that of China where Carlyle has had trouble in acquiring a construction machinery firm for nearly a year?
Protectionism does appear to be on Taiwan's agenda when it comes to buyout firms. But as long as there are attractive buyout opportunities, private equities will continue to thrive.
But the government needs to be cautious about erecting barriers that could threaten the nation's attractiveness to foreign capital. It should not be just private equities that the government cares about, but the interests of shareholders as well as the health and transparency of the business environment.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Ursula K. le Guin in The Ones Who Walked Away from Omelas proposed a thought experiment of a utopian city whose existence depended on one child held captive in a dungeon. When taken to extremes, Le Guin suggests, utilitarian logic violates some of our deepest moral intuitions. Even the greatest social goods — peace, harmony and prosperity — are not worth the sacrifice of an innocent person. Former president Chen Shui-bian (陳水扁), since leaving office, has lived an odyssey that has brought him to lows like Le Guin’s dungeon. From late 2008 to 2015 he was imprisoned, much of this