Fubon Financial Holding Co on Friday last week said it would extend its tender offer for Jih Sun Financial Holding Co by 50 days until March 23, as the company’s hostile takeover of its smaller rival has not yet gained approval from the Fair Trade Commission. The initial offer of NT$13 per share, announced on Dec. 18 last year, surprised the domestic financial sector, and was on Jan. 5 criticized by Jih Sun as too low.
Fubon’s bid has also raised questions from lawmakers and market watchers as to whether one of Jih Sun’s major shareholders has links to a Chinese investment entity, and if Fubon aims to help the rumored Chinese investor dispose of his stake in Jih Sun for cash. Government agencies, including the Financial Supervisory Commission (FSC), the Investment Commission and the Mainland Affairs Council, have reportedly launched probes into whether Chinese investors are involved.
Rumors of the firm’s Chinese funding have been around for years. In 2006, Jih Sun invited Japan’s Shinsei Bank Ltd to become its strategic investor and bring in fresh capital to support the debt-ridden Jih Sun International Bank. In 2009, Jih Sun sold a stake to Capital Target Ltd to fund and improve its banking unit’s financial structure. Capital Target has since become Jih Sun’s second-largest shareholder with a stake of 24 percent, behind Shinsei Bank, which holds a 36 percent stake.
It has been widely rumored in the financial sector that Capital Target, which says it invests in Jih Sun to extend its business from real estate to banking, had in purchased the shares for Chinese tycoon Xiao Jianhua (肖建華), head of Tomorrow Holding Ltd. While the speculation has never been confirmed over the past 11 years, ever since Xiao was reportedly abducted by Chinese security agents in January 2017 from his Hong Kong Four Seasons-serviced apartment to mainland China, news has from time to time emerged that he has sold his alleged Jih Sun stakes to local conglomerates.
Government investigations into covert Chinese investments in Taiwan are a step in the right direction. It is the government’s duty to examine whether Chinese investment enters Taiwan through legal channels or sneaks in via back doors, routed through third parties and disguised as non-Chinese foreign investment.
Regardless of whether Fubon’s tender offer is successful, the government must thoroughly investigate whether stakes held by Chinese entities change hands and clearly explain its findings to the public.
The call for a stricter government review of the Jih Sun takeover comes in the wake of the FSC’s actions last year against illegal Chinese investments in the century-old household appliance maker Tatung Co. The commission imposed heavy fines on Tatung, suspended shareholder rights of Chinese investors and requested the sale of dubious shares within six months. If the FSC could act boldly to set things right in the Tatung case, there is no good reason for it not to apply the same principles and standards in the Jih Sun case.
Some might criticize the government’s stance toward Chinese investment, saying that it is no different from any other foreign investment. Yet it is wrong to regard the issue only from the viewpoint of investment, as it also concerns national security. Therefore, one crucial task is to kick out illegal Chinese investors as soon as possible, because no one knows the actual motive behind their investments. The government must take clear and decisive steps to review shares in Taiwanese firms held by Chinese investors. It should severely penalize those who contravene regulations. A lenient stance in the Jih Sun case could backfire.
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