China Development Financial Holding Corp (中華開發金控) revived plans to raise its stake in Grand Cathay Securities Corp (大華銀行) a year after shareholders spurned its hostile bid, as it tries to expand into the securities industry.
Taiwan's third-largest financial company, which owns 17 percent of Grand Cathay, wants to increase its stake to at least 25 percent and may take as much as 51 percent, Chairman Liu Tai-ying (劉泰英) said. It needs to own at least a quarter of Grand Cathay, whose shares rose by their seven percent daily limit, for the brokerage to qualify as a member of the holding company.
A new law allowing banks, brokers and insurers to combine under holding companies is prompting mergers across the financial industry, where many companies are struggling in the aftermath of last year's recession, the worst on record.
"Consolidation in the banking and securities industries in Taiwan is going to speed up as the holding company law means only large, strong players can survive," said Liu Juming, who helps manage NT$15 billion (US$428 million) at Asia Pacific Securities Investment Trust Co (金亞太投信), which holds the stock.
Officials at Grand Cathay, which has a market value of about NT$17.9 billion, weren't immediately available for comment. The company's shares rose 6.8 percent to NT$14.95. China Development rose 1.8 percent to NT$22.10.
China Development was formed in December when China Development Industrial Bank (中華開發銀行) reorganized into a holding company structure. In April last year, an NT$5.1 billion offer for 22 percent of Grand Cathay was spurned by the company's shareholders.
"I have a special affection for Grand Cathay and I've always wanted to buy a brokerage to get into the securities business," China Development Chairman Liu said. The bank plans to buy other brokers, he said.
China Development last year sold its 53 percent stake in China Securities Investment Trust Corp (匯豐中華投信), Taiwan's largest fund manager, to HSBC Holdings Plc, which owns two of the three biggest banks in Hong Kong and wants to expand in Taiwan. It received about US$103 million for its stake.