Capital Securities Corp’s (群益證券) announced on Monday evening that the acquisition of rival Taiwan International Securities Corp (TISC, 金鼎證券) would not only boost its market share but also helped end a five-year board room dispute in the latter.
“After the acquisition, Capital Securities will increase its market share in brokerage to 6.01 percent from 4.13 percent and the market share in financing to 8 percent from 5.21 percent,” JPMorgan analyst Dexter Hsu (許世德) wrote in a client note.
Shares of TISC surged 6.8 percent to NT$11 yesterday after Capital Securities said it planned to offer NT$12.5 per share for it through an open tender, a price that represented a 21.36 percent premium over TISC’s closing price of NT$10.3 on Monday.
Capital Securities shares were unchanged at NT$14.90 yesterday.
The transaction is aimed at expanding its market share as Capital Securities said it aimed to become the nation’s No. 4 brokerage firm from its current No. 7 position, according to the company’s stock exchange filing.
“We believe there will be more consolidation in the brokerage market, particularly among small and independent brokers,” Hsu said.
Capital Securities is proposing to acquire TISC via a tender offer and share swap over the next two to three quarters. It plans to begin the tender offer no later than Sept. 23 by buying a 67 percent to 100 percent stake in the smaller brokerage and expects to complete the deal by the end of the year, the filing said.
As TISC has 1.08 billion outstanding shares, it is estimated that Capital Securities will pay NT$13.53 billion (US$421.4 million) to complete the deal. Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor’s, said yesterday it affirmed its “twA” long-term and “twA-1” short-term counterparty credit ratings on Capital Securities, with a stable outlook on the long-term rating.
“We expect Capital Securities’ capitalization to remain adequate after the merger,” Taiwan Ratings said in an e-mailed statement. “Its overall capitalization would not significantly change after absorbing TISC’s book, which we do not expect to include any potential asset impairments or contingent liabilities.”
Capital Securities said it would purchase shares not just from the Chang family, the founding shareholder of TISC, but also from China Development Financial Holding Co (中華開發金控), a major shareholder, ending a boardroom dispute between the two major shareholders since China Development Financial launched a hostile takeover of TISC in 2006.
Last month, the Taipei District Court appointed three temporary managers to take over TISC after the brokerage company plunged into a power struggle between these two major shareholders.
Capital Securities said on Monday it has signed an agreement with China Development Financial to purchase its entire 48.47 percent stake and inked another agreement with the Chang family to buy its 18.53 percent stake, according to the filing.
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