Jih Sun Financial Holding Co (日盛金控), the nation's 12th largest financial group by assets, yesterday announced it would form a strategic alliance with Shinsei Bank Ltd by selling a 31.8 percent stake for NT$11.34 billion (US$36.19 million) to the Japanese bank through a mix of common and preferred shares in a private placement.
Shinsei Bank will become the largest shareholder of the Taipei-based financial holding firm and acquire three seats on its 11 member board.
Jih Sun Financial will also sell a 1.85 percent stake for NT$660 million to Integral Group, a Taipei-based private equity fund, the company said.
Integral Group, which also helped arrange the fundraising activity, will not obtain any board seats.
"True partnership" is the reason Shinsei decided to invest in Jih Sun Financial, a relatively smaller player in Taiwan's finance sector, bank president and chief executive officer Thierry Porte told the Taipei Times on the sidelines of the contract signing ceremony in Taipei yesterday.
True partnership allows Shinsei Bank to have a say in Jih Sun Financial's decision-making, management and operations, he said.
The new partnership is expected to benefit the Taiwanese company by giving it a stronger financial structure and additional business know-how.
"The partnership with Shinsei Bank will help strengthen our internal financial structure and provides us with professional product and service development know-how. It will also enhance our international competitiveness," Jih Sun Financial's chairman Edward Chen (
The two parties will cooperate in the areas of retail banking, corporate banking, information technology systems and operational management, Chen said.
The strategic alliance allows Shinsei Bank to appoint the chief risk management official at Jih Sun Financial as well as credit control officials at Jih Sun International Bank (
A total of NT$12 billion will be injected into the financial group by the end of July and be used for the one-time write-off of the bank's NT$9.8 billion loss incurred from the sale of bad debts, Jih Sun Financial's chief financial officer Mike Wang (
The banking unit is expected to see extra annual profits of NT$3.5 billion afterward, Wang said.
Analysts welcomed the announcement and said Jih Sun Financial shares would rise in the near future.
"This is a turnaround story and investors can consider starting bottom-fishing now, said Shirley Yang (
Jih Sun Financial could turn profitable with earnings of NT$1 per share, said Yang, who gave a target price of NT$11.
This could be translated into a nearly 30-percent rise compared with the company's current share price, which closed unchanged at NT$8.57 on the over-the-counter Gretai Securities Market yesterday, she said.
Jih Sun Financial incurred a net loss of NT$118 million, or NT$0.055 per share, for the first four months of this year.
Shinsei Bank has been looking for investment targets in Taiwan for a while.
It reportedly bid for a 22 percent stake in state-controlled Chang Hwa Bank's (
The bank has no plan to invest in another Taiwanese bank for the time being but has not ruled out looking for joint investment opportunities with Jih Sun Financial, Porte said.
Joint efforts to tap into China's market could be the long-term plan, he said, without elaborating.
The finance sector has seen robust foreign investment since the beginning of this year, with Newbridge Capital of the US and Nomura Group together investing NT$31 billion for a 26.5 percent stake in Taishin Financial Holding Co (
Singapore-based Temasek Holdings Ltd acquired a 15 percent stake in E.Sun Financial Holding Co (
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