Shares of Mega Financial Holding Co (兆豐金控) plunged yesterday after foreign analysts downgraded the company's rating, following the nation's second-largest financial group's announcement last week of its intention to acquire debt-ridden Taiwan Business Bank (台灣企銀).
Mega Financial shares closed 3.28 percent down at NT$22.1, while Taiwan Business shares gained 2.51 percent to NT$8.59 on the Taiwan Stock Exchange yesterday.
BNP Paribas Securities (Taiwan) Co yesterday announced it will downgrade Mega Financial shares to "Hold" from "Buy," with a target price of NT$21.2, down 6.6 percent from NT$22.7.
The downgrade was made to "reflect higher corporate governance risks following its surprise announcement," BNP Paribas Securities head of research Jesse Wang (王嘉樞) said yesterday.
The state-controlled financial holding firm said last Friday that it planned to buy a 26 percent stake in the state-run bank for NT$10 billion, or no higher than NT$9 per share, within the next year.
The deal is not driven by commercial interests, considering Mega Financial's inadequate capacity of management in near term under the planned merger of its banking arms, the Internat-ional Commercial Bank of China (中國國際商銀) and Chiao Tung Bank (交通銀行), possible earnings dilution after the acquisition and Taiwan Business Bank's strong labor union, Wang said.
“Mega Financial can be likened to Santa Claus offering the Ministry of Finance a Christmas gift to help it complete the second stage of financial reform — to reduce the number of state banks to six,” he said.
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