Taishin Financial, Shin Kong Financial boards agree to merger plan

Taipei, Aug. 23 (CNA) Taishin Financial Holding Co. and Shin Kong Financial Holding Co. have agreed to a merger through a stock swap, which will result in the fourth largest financial holding company in Taiwan.

The boards of both companies met separately Thursday and issued green lights to the merger plan, in which Taishin Financial will swap 0.6022 shares of its common stock for one Shin Kong Financial share and exchange one preferred Taishin Financial share for a preferred Shin Kong Financial share.

That would translate, according to a market estimate, into an acquisition price of about NT$11.32 per share, which represented a roughly 9.07 percent discount on Shin Kong Financial's closing price of NT$12.45 on Thursday.

After the merger, Shin Kong Financial will become part of Taishin Financial, though the company will be renamed Taishin-Shin Kong Financial Holding.

Shareholders of Taishin Financial will own a 55 percent stake in the new company while shareholders of Shin Kong Financial will take the remaining 45 percent.

As of the end of the first quarter of 2024, Shin Kong Financial had NT$5.08 trillion (US$159 billion) in assets, and Taishin Financial had NT$3.2 trillion in assets, giving the combined company almost NT$8.29 trillion in assets, closing in on the NT$8.37 trillion in assets held by No. 3 CTBC Financial Holding Co.

There are still hurdles to clear, however. The two financial holding companies have scheduled their own special general meetings on Oct. 9 to seek the approval from shareholders.

The merger plan will also have to get the green light from the Financial Supervisory Commission (FSC), Taiwan's top financial regulator, and the Fair Trade Commission before finalizing a merger date.

At Shin Kong Financial's board meeting on Thursday, 11 board directors voted for the merger plan while three voted against it and one abstained.

Wu Shin-ju (吳欣儒), one of the three directors who voted against the plan, described it as a merger "without sincerity and honesty."

The director who abstained, Lai Hui-min (賴慧敏), said Taishin Financial should sweeten the merger plan by raising the stock swap ratio.

Taishin Financial Chairman Thomas Wu (吳東亮) urged the shareholders of the two companies to support the merger plan, however, saying it will become the largest merger and the first merger reached through a consensus in Taiwan's financial holding sector.

The only previous merger of financial holding companies was when Fubon Financial Holdings Co. acquired Jih Sun Financial Holding Co., but that was considered to be a hostile takeover.

The two companies have planned the merger for two to three years and complement each other's businesses, Thomas Wu said.

Analysts said Taishin Financial is good at banking, and the merger will enable it to capitalize on Shin Kong Financial's strength in the insurance and securities businesses.

Financial holding companies in Taiwan generally own businesses in the banking, insurance and securities sectors.

Wu and Shin Kong Financial Chairman Mark Wei (魏寶生) have also signed an agreement to retain Shin Kong Financial's more than 15,000 employees for three years after the merger.

Citing the Financial Holding Company Act, Lin Chih-chi (林志吉), deputy director general of the FSC's Banking Bureau, said the FSC has four criteria it uses to review a merger plan in the financial sector.

The commission will look at whether the buyer's capital adequacy ratio meets legal requirements, and whether the buyer can continue to operate smoothly, extend its reach out of Taiwan, and fulfill its social responsibility, according to the FSC guidelines.

Thomas Wu said he had no doubt that the merger will meet the four criteria.

CTBC Financial may still be interested in disrupting the plan.

On Tuesday, the company said in a statement that it planned to launch a tender offer to acquire Shin Kong Financial, surprising the market.

CTBC Financial said it had faith that the buy-in deal it offered would improve shareholder value for money.

Wu criticized CTBC Financial's tender offer, however, saying the plan came out of nowhere.

Shin Kong Financial President Welch Lin (林維俊) said CTBC Financial's plan was like a rainbow in the sky that could not be touched and described it as an attempt at a hostile takeover.

As of Friday, CTBC still appeared interested in cutting in on the deal, with market sources saying the company was expected to hold a board meeting later Friday to disclose more details about its plan to acquire Shin Kong Financial.

If CTBC Financial were to bring Shin Kong Financial under its corporate umbrella, it would become the largest financial holding company in Taiwan by assets at NT$13.6 trillion, leapfrogging Cathay Financial Holding Co.'s NT$13.3 trillion and Fubon Financial Holding Co.'s NT$11.78 trillion.