Shin Kong Financial Holding has agreed to merge with a smaller rival in a deal that sets up a takeover battle for Shin Kong with another suitor, CTBC Financial Holding Co, reports Bloomberg.
Shin Kong and Taishin Financial Holding. will combine via a share swap, the two companies announced at a press briefing yesterday.
The merger decision was announced just two days after CTBC said it was making a tender offer for Shin Kong, a deal that would form Taiwan’s largest financial holding company by assets. A Shin Kong and Taishin merger would create the fourth-biggest financial holding firm in Taiwan by assets, just shy of CTBC.
The proposed deal needs to be approved by the Financial Supervisory Commission.
Bloomberg reports that talks of a merger between Shin Kong and Taishin, founded by brothers in the Wu family, have heated up in recent years as Shin Kong struggled to lift itself out of a series of crises.
In 2020, then chairman Wu Tung-chin was suspended from his role at the life insurance business for poor internal controls that led to a NT$27.6m ($860,000) fine for the unit. He continued to intervene in the firm’s operations, prompting another fine in 2022 and a regulatory call for its management team to operate independently.
Shin Kong swung to a profit of NT$3.11bn in the first quarter from a loss a year earlier, though its life unit still struggled to recover. Taishin’s income slipped 1% to NT$5 billion for the period, with its banking business contributing much of the profits.
Wu and his younger brother Wu Tong-liang, who founded Taishin, both got their start under their father Wu Ho-su’s Shin Kong Group.
After drifting apart, the elder brother managed to build a financial empire with businesses in insurance, brokerage and underwriting. His flagship Shin Kong Life Insurance is one of Taiwan’s largest by assets, yet it has faced regulatory scrutiny for its failure to meet capital adequacy requirements.
Taishin acquired Prudential Financial’s life unit on the island in 2020.