Mega Financial Holding Co (兆豐金控), the nation's second-largest financial group by assets, announced yesterday it would acquire smaller rival Taiwan Business Bank (台企銀), in a bid to strengthen the market power of its banking arm and dominate Taiwan's banking sector.
The state-controlled Mega Financial plans to buy a 26 percent stake in the state-run bank for NT$10 billion (US$300 million) or around NT$9 per share within the next year, Mega Financial's spokesman Joseph Shieh (謝劍平) told a press conference yesterday.
The deal would create a bank with estimated combined assets of NT$2.84 trillion, giving Mega Financial a 10.89 percent market share, Shieh said. The percentage is likely to make Mega Financial the second largest bank after the Bank of Taiwan's (台灣銀行) 11.59 percent, which acquired the state-owned Central Trust of China (中央信託局) last month.
"Private banks and financial holding firms are expensive, while Taiwan Business, which enjoys 125 branches nationwide, is expected to have strong earnings generation power," Shieh (謝劍平) said.
Mega Financial hopes to first get a controlling position and ultimately obtain management power, and include it as one of their subsidiaries in the next few years, Shieh said.
A financial holding firm can include a financial institution in which it controls more than a 25 percent stake into its subsidiary lineup, according to the Financial Holding Company Act (金控法).
This is the state financial holding group's second attempt to acquire Taiwan Business after the bank's share sale auction collapsed in September.
Before the bid, Mega Financial participated in state-run Chang Hwa Commercial Bank's (彰化銀行) auction of 22.5 percent preferential shares in July that was won by smaller rival Taishin Financial Holding Co (台新金控) for NT$36.5 billion.
Mega Financial's banking arms, the International Commercial Bank of China (
The government has vowed to consolidate the nation's over-crowded banking sector by halving the number of state banks to six by the year's end, as well as helping at least three "national champion" banks to achieve a market share of more than 10 percent each.
The Ministry of Finance supported the financial holding firm's decision after mulling their development needs and the banks' possible synergies. Also, the deal conformed to the government's consolidation policy, the ministry said in a statement yesterday.
Meanwhile, Taiwan Business Bank said they did not know Mega Financial's plan in advance.
"This is not a merger but a unilateral attempt to acquire our stake. We respect the free market mechanism," Michael Chang (張兆順), the bank's chairman told the Taipei Times in a phone interview.
Mega Financial shares yesterday gained 3.16 percent to NT$22.85 while Taiwan Business shares closed down 1.45 percent to NT$8.38 on the Taiwan Stock Exchange.
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