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Magazine digest -- New round of financial sector integration

2011/05/16 13:44:14

Several takeover deals this year signal the emerging trend ofmergers and acquisitions in Taiwan's financial sector, even thoughgovernment officials have been avoiding calling it a new round offinancial reform.

Following E.Sun Financial Holding Co.'s takeover of Chu NanCredit-Cooperative Association that was announced on March 18,Chinatrust Financial Holding Co. announced the purchase of MetlifeTaiwan Insurance Co. on March 28.

Later on April 9, Yuanta Financial Holding Co. acquired PolarisSecurities Co. in a NT$48.9 billion (US$1.69 billion) merger, thelargest deal between Taiwanese brokerage firms.

The acquisition of Polaris ensures Yuanta's leading position withthe combined market share of 15 percent, far ahead of the 7.61percent of the rival in the second place -- KGI Securities Co.

Goldman Sachs analyst Vincent Chang said the Polaris deal islikely to encourage more merger attempts in the sector. Both ChinaDevelopment Financial Holding Corp. and Fubon Securities Co. are saidto be looking for acquisition targets.

The new round of consolidation is eagerly anticipated by thefinancial industry because of limited profits in the highlycompetitive market.

In 2010, with total assets reaching NT$32 trillion at the end ofthe year, Taiwanese banks only reported a joint profit of over NT$180billion.

According to the Taiwan Stock Exchange's Market Observation PostSystem, several financial holding companies, including First, Cathayand Shin Kong, have raised their cash position in 2010, which is asign of takeover plans.

As for state-owned banks, both Premier Wu Den-yih and FinancialSupervisory Commission Chairman Chen Yuh-chang have said in lateMarch that they are open to mergers between these banks but insist ontransparency in the process.

While such an official stance is the result of several scandalsduring the previous round of financial reform in 2004, a financialholding company executive said the regulator now has imposed severalrestrictions on merger deals.

He said while it is impossible for a private company to take overa state-owned one, smaller players in the market will also not beallowed to acquire larger businesses in terms of assets.

It is also necessary to get the approval of all partiesconcerned, such as the management or employees, so the regulator willnot consider the merger hostile, he added.

"Honestly, there are far fewer acquisition targets for privatecompanies, which creates heated competition for potential deals. Italso makes winners in such bids end up paying a much higher price, "the executive said.(CommonWealth 470)(translated by Kay Liu)