China Development Financial Holding Corp’s (CDFHC, 中華開發金控) and China Life Insurance Co (中國人壽) shares rose yesterday following a major acquisition deal announced on Friday last week.
CDFHC had announced plans to acquire a 25.33 percent stake in Taipei-based China Life Insurance at an estimated 17.3 percent premium in a NT$30.8 billion (US$1 billion) tender offer.
CDFHC shares rose 2.16 percent to NT$8.51, while China Life Insurance gained 8.21 percent to NT$32.95 in Taipei trading yesterday.
The acquisition would add a life insurance arm to CDFHC, which includes KGI Securities (凱基證券) and KGI Bank (凱基銀行), CDFHC acting president Hsu Daw-yi (許道義) said in a media briefing at the Taiwan Stock Exchange on Friday.
As of the end of the first quarter, China Life Insurance ranked fifth among the nation’s life insurers.
CDFHC controls a 9.6 percent stake in China Life Insurance and the acquisition would increase its stake to about 35 percent, meeting the requirement for CDFHC to file consolidated financial reports that include part of the insurers’ earnings.
Upon the completion of the acquisition, CDFHC would see its total net asset value rise from NT$165 billion to NT$217.9 billion, raising the company’s ranking among its peers in terms of size, Hsu said.
CDFHC has adequate cash reserves and the company would limit the use of leverage to prevent share dilution for its investors, Hsu said.
CDFHC has been sitting on NT$20 billion in cash reserves as it wound down China Development Industrial Bank (CDIB, 中華開發工業銀行), the nation’s last industrial bank focusing on direct investments, as the business model soon lost favor to more viable commercial banks.
Hsu said that company would work with the life insurer in private equity and venture capital investments, which are the specialties of CDIB Capital Group (中華開發資本), the new company reorganized from CDIB.
Meanwhile, CDFHC yesterday said that its net income was NT$1.03 billion, compared with NT$57 million a year ago.
Aggregate earnings in the first half were NT$3.54 billion, gaining 74 percent annually. Earnings per share were NT$0.24 in the period.
China Life Insurance reported net income of NT$1.71 billion last month, bringing cumulative net income in the first half to NT$2.34. Earnings per share were NT$0.67 in the first half.
The insurer has taken heavy foreign-exchange losses due to a stronger New Taiwan dollar. Its net income in the first six months last year was NT$5.92 billion. Earnings per share were NT$1.77 in the period.
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