Taishin, CTBC seek FTC approval for plans to takeover Shin Kong

Taipei, Sept. 4 (CNA) Taishin Financial Holding Co. has filed an application with the Fair Trade Commission (FTC) for approval to merge with Shin Kong Financial Holding Co., while CTBC Financial Holding Co. filed a different application with the FTC for a tender offer to acquire Shin Kong Financial, the commission said Wednesday.

The Cabinet-level FTC said it will check each of the two applications for up to 90 days after the review process begins.

Taishin Financial and CTBC Financial are both aiming to take Shin Kong Financial completely under their corporate umbrella.

Chen Chih-min (陳志民), vice chairman of the FTC, said both cases are a horizontal combination, so the commission will consider several major aspects, including market concentration, possible collusion in pricing, and the potential of synergies to provide better services to clients.

A horizontal combination is the merger or acquisition of companies in the same industry at the same stage of production or distribution.

Chen said the Taishin-Shin Kong deal or the CTBC-Shin Kong combination would create a large-sized entity, adding that Taishin Financial and CTBC Financial will likely need to provide more information on their plans and that the paperwork could take several months to complete.

Based on Chen's assessment, it is unlikely that the Taishin-Shin Kong case review will be completed before two special general meetings of the companies scheduled for Oct. 9 when they will secure approval from their shareholders.

On Aug. 22, Taishin Financial and Shin Kong Financial announced a merger agreement in a stock swap after their boards greenlit the plan.

On Aug. 23, CTBC Financial said it planned to launch a tender offer to acquire Shin Kong Financial.

Under Taishin Financial's proposal, it 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 (US$0.35) per share. That represents roughly a 9.07 percent discount on Shin Kong Financial's closing price of NT$12.45 on Aug. 21.

For its part, CTBC Financial on Aug. 23 unveiled its pricing by proposing to acquire 51 percent of Shin Kong Financial, for NT$14.55 (US$0.46) per share in the first stage before acquiring the remaining Shin Kong Financial shares.

The tender offer price to obtain one share of Shin Kong Financial's common stock is a combination of NT$4.09 in cash and a 0.3132 share of CTBC Financial's common stock.

As CTBC Financial's offer beat Tasishin Financial's, the latter has said it could consider raising the stock swap ratio to make its deal more appealing.

While Taishin Financial criticized CTBC Financial for resorting to attempting a hostile takeover without approval from Shin Kong Financial's director board, CTBC Financial dismissed the argument, saying it has aimed to appeal to Shing Kong Financial's shareholders through the tender offer to secure broader approval.

On Aug. 26, CTBC Financial filed an application to seek approval from the Financial Supervisory Commission (FSC) before its tender offer kicks off.

The FSC has 15 business days to decide whether to approve a tender offer application and if it does not respond to the application, it will automatically obtain approval.

In other words, the FSC has to express its stance on the tender offer by Sept. 16.

Chen said the FTC will focus on whether market competition will be hampered by a merger or an acquisition, adding that the commission will review the two applications separately.

Shin Kong Financial will not seek approval from the FSC, the top financial regulator in Taiwan, until its shareholders and Shin Kong Financial's shareholders issue the green light.

According to CTBC Financial, acquiring Shin Kong Financial would boost its assets to NT$13.5 trillion, up from roughly NT$8.37 trillion. It would also become the largest financial holding firm in Taiwan.

On the other hand, merging with Shin Kong Finanical would raise the assets of Taishin Financial to almost NT$8.29 trillion. It would become the fourth largest financial holding firm in Taiwan.