Cathay Financial Holding Co (
The owner of the island's biggest insurer is paying a 24 percent premium to United World's closing share price today to quadruple its network of bank branches.
The takeover ends a yearlong battle for Taiwan's 10th largest lender by assets with rival Fubon Financial Holding Co (
"This will be beneficial for Cathay because it lacks a strong bank," Jeff Chen, who helps manage NT$3.5 billion of Taiwan equities at E.Sun Securities Investment Trust Corp, said of the United World takeover.
"This will add points to the financial holding company," he said.
Shareholders of United World will receive one Cathay share for every 1.6 of their shares, Cathay Financial said in a statement. The takeover will create a company with NT$2.1 trillion of assets and a market value of about NT$385 billion.
United World shares have risen 21 percent in the past three days on expectations Cathay would win the bank. Today they rose 6.8 percent to NT$25.20. Cathay Financial shares rose 2.7 percent to NT$49.9.
"The banks being targeted by the holding companies have room to rise because of the premium being paid for them," said Eric Lai, who manages about NT$900 million in stocks at Fidelity Investment Securities Investment Trust Co.
The government has a 27 percent stake in United World, a lender with assets of about NT$707 billion, and wants the island's lenders to combine into fewer, stronger lenders that can better compete with foreign banks following the island's accession to the WTO.
Taiwan last year allowed the creation of financial holding companies, which can acquire banks, brokerages, insurers and money managers, to spur mergers and acquisitions as the government speeds up deregulation.
In other banking news, the Taipei district prosecutor's office is looking into trading in the shares of Fubon Financial Holding Co and Taipei Bank Ltd before the two announced a merger, ETtoday.com Web site reported without citing the source of its information.
Eleven foreign brokerages, including Credit Suisse First Boston, Goldman Sachs Group Inc, Morgan Stanley and Salomon Smith Barney Inc, handled large amounts of sell orders of Fubon Financial shares and buy orders for Taipei Bank before the two announced a merger last Thursday afternoon, the Web site news provider said.
Fubon Financial shares fell as much as 6.8 percent, their daily limit, during Friday trading hours and Taipei Bank shares surged by their daily trading limit.
Fubon Financial, Taiwan's second-largest financial company, said on Thursday afternoon it will take control of Taipei Bank, a lender controlled by the city government, in an all-share offer valued at about NT$80.3 billion (US$2.4 billion).
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