Tue, Apr 10, 2007 page1

• Citigroup to buy out local bank

  BOOC SALE The deal will provide Citi Taiwan with access to a client base in excess of a million and expand its existing nationwide branch network six-fold to 66

  • By Amber Chung / STAFF REPORTER
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  Citigroup Inc announced yesterday that it would buy out the Bank of Overseas Chinese (BOOC,華僑銀行) for NT$14.1 billion (US$426 million), or NT$11.8 per share, via a cash-out merger. This will make it the biggest foreign bank in Taiwan by assets.

  The two parties inked a pact yesterday for the long-rumored deal. They expect the merger to be completed in the second half of this year after obtaining approval from shareholders and financial regulators in Taiwan and the US, the joint statement read.

  BOOC is scheduled to hold its annual general meeting on June 15. The lender will be delisted from the over-the-counter market and renamed Citi.

  The final price is subject to certain closing adjustments, the statement said.

  It could fall somewhere between NT$11.5 and NT$11.8 after taking employees' compensation expenses into account, said Wayne Pai (白文正), founder and chief executive officer of Polaris Financial Group (寶來金融集團) that controls more than 40 percent of BOOC.

  The transaction brings more than a million clients to Citi Taiwan, boosting its branch network six-fold to 66 nationwide from 11 and its assets by US$8.5 billion to a total of US$22.8 billion, the bank said.

  "This is a perfect combination of Citi's global products and BOOC's local network and small and medium enterprise customer base," Citi Taiwan country officer Morris Li (利明献) told a press conference yesterday.

  Wealth management and capital market are the major focus for Citi in Taiwan, Li said.

  Citi was in talks with several local rivals when the deal was initiated in 2005 and only Pai agreed with the 100-percent takeover that eventually led to the acquisition, he said.

  The deal is the second foreign buyout of a local lender in Taiwan, following Standard Chartered Bank's takeover of Hsinchu International Bank (新竹國際商銀). This boosted the British bank's number of outlets across the nation from three to 86.

  These transactions come at a time when the government is pushing consolidation of the nation's fragmented banking sector in the hope that some local banks will be taken over by foreign rivals to stimulate international competitiveness.

  "It's not easy for any bank to expand their branch network in Taiwan, and buying existing banks is the quickest way to achieve that,'' said Eddy Yang, chief executive of Taiwan Ratings Corp, a local credit rating venture with Standard & Poor's Ratings Services.

  Li said Citi would constantly review its expansion strategy when he was asked whether Citi would rely on further mergers and acquisitions for growth as a number of small-sized lenders are suffering from deteriorating financial profiles due to consumer credit abuse.

  In 2000, Citigroup paid NT$23 billion for 15 percent of Taiwan's Fubon Group, now known as Fubon Financial Holding Co (富邦金控). It began selling down the holding in 2004, saying it wanted to pursue its own strategy, and now has 11 branches in Taiwan.

  Citigroup is trying to expand consumer banking nationwide to compete with overseas rivals including Standard Chartered.

  The executive said there are no plans for any redundancies in the first year of the takeover of the local lender.

  They will communicate closely with BOOC's employees from the beginning of integration to the end, Li said.

  "I am confident and optimistic about completion of the integration work," he said.

  To ease employees' concerns, the local lender will set up a roadshow for branches nationwide to ensure agreements on seniority settlement and compensation schemes would stay unchanged, BOOC chairman Mike Chang (張嵩峨) said.

  Employees were not unduly worried, according to BOOC's labor union. The union said it may not react strongly as long as the management and Citi can act in compliance with existing agreements.

  BOOC closed up 2.22 percent at NT$11.50 on the GRETAI Securities Market yesterday following the announcement.

  additional reporting by Bloomberg
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