CTBC Financial to revise takeover plan after FSC rejection

Taipei, Sept. 18 (CNA) CTBC Financial Holding Co. said on Tuesday night that it will revise a tender offer plan to acquire Shin Kong Financial Holding Co., just one day after the Financial Supervisory Commission (FSC) rejected its takeover proposal.

In a statement filed to the Taiwan Stock Exchange, where CTBC Financial's shares are traded, the financial holding company expressed regret over the FSC's rejection, and announced plans to revise its takeover proposal to address the concerns raised by the financial authorities.

CTBC Financial said it will complete the revision as soon as possible and send the revised version to the board of directors for approval.

On Monday evening, the FSC, the top financial regulator in Taiwan, held a news conference to announce its rejection of CTBC Financial's tender offer plan, saying the company failed to come up with a comprehensive implementation plan in its application submitted on Aug. 26.

According to the FSC, CTBC Financial planned to acquire a stake of between 10 percent and 51 percent in Shin Kong Financial through a tender offer as an initial stage of its takeover, before taking Shin Kong Financial completely under its corporate umbrella at a later date.

However, the FSC said after reviewing the proposal, it found that CTBC Financial did not adequately address how it would manage all potential scenarios related to the wide range of stake purchases in its tender offer.

Additionally, the FSC noted that the proposal did not specify what CTBC Financial would do with the shares acquired during the tender offer process if it is unable to acquire Shin Kong Financial as planned.

CTBC Financial did not have a close grasp of the financial conditions of Shin Kong Financial's life insurance subsidiary and did not come up with a concrete commitment on how to raise the capital size of the subsidiary, referring to Shin Kong Life Insurance Co., according to the FSC.

The escalating competition between CTBC Financial and Taishin Financial Holding Co. to acquire Shin Kong Financial has drawn much market attention recently, with Taishin Financial labeling CTBC Financial's tender offer as a hostile takeover which was not approved by Shin Kong Financial's board members.

On Aug. 23, CTBC Financial announced it will use a combination of NT$4.09 per share in cash and an exchange ratio of 0.3132 common shares of CTBC Financial for every one common share of Shin Kong Financial.

However, the FSC said CTBC Financial's tender offer included its stock as part of its payment for Shin Kong Financial shares, which the FSC feared would not well protect shareholders of both companies.

In a takeover scenario without consensus from Shin Kong Financial, the FSC noted that if CTBC Financial issues new shares as part of its payment for Shin Kong Financial's shares, fluctuations in CTBC Financial's share price are expected to result in different acquisition prices.

The could create uncertainty in the stock market during the tender offer process, potentially affecting the performance of both companies' shares, which is the last thing their shareholders want to see, according to the FSC.

Market analysts said the FSC tries to prevent any hostile takeovers in the financial sector.

After the FSC's rejection, Taishin Financial urged shareholders to support its plan of a merger with Shin Kong Financial. Both companies have scheduled their own special general meetings for Oct. 9 in a bid to secure approval from shareholders.

To compete with CTBC Financial, Taishin Financial on Sept. 11 sweetened the deal by raising its stock swap ratio, offering 0.672 common shares, plus 0.175 preferred shares in exchange for one common share of Shin Kong Financial, up about 25 percent from its original plan publicized on Aug. 22. Like the original plan, the revised merger plan has been approved by both companies' board meetings.

On Wednesday, Hung Shih-chi (洪士琪), a board member of Shin Kong Financial and vice chairman of Shin Kong Life, said if shareholders reject the merger plan, the two companies will have to maintain the status quo, hindering their progress and ability to compete effectively in the market.

Hung called for shareholders of the two companies to vote for the merger plan to create an all-win situation for the two firms, their employees, clients and shareholders.

However, Lin Po-han (林伯翰), one of Shin Kong Financial's major shareholders, urged the company's shareholders to shoot down the merger plan, while Hung blasted Lin for blocking the company's efforts to make progress through a combination with Taishin Financial.

On Wednesday, shares of CTBC Financial rose 2.75 percent to lose at NT$33.60 (US$1.05) on the local main board after the rejection from the FSC, while Shin Kong Financial plunged 7.87 percent to end at NT$12.30 and Taishin Financial shed 3.45 percent to close at NT$18.20.