Taiwan's financial regulator yesterday rejected a takeover bid by financial conglomerate CTBC Financial Holding for rival Shin Kong Financial Holdings, saying that the latter's plans on how to implement the merger were incomplete.
CTBC is facing stiff competition from Taishin Financial Holdings for the merger, which will create the island’s biggest financial group.
According to a report by Central News Agency, CTBC planned to acquire a stake of between 10% and 51% in Shin Kong through a tender offer as an initial stage of its takeover, before taking Shin Kong under its corporate umbrella completely at a later date.
However, FSC vice chair Chiu Shu-chen said the FSC found after a review that CTBC did not say in its application how it would deal with every possible scenario through the tender offer, and it also failed to tell the FSC that if it could not acquire Shin Kong as it plans, what it would do with the shares it gains during the tender offer process.
Ms Chiu said in its application, CTBC did not have a close grasp of the financial conditions of Shin Kong's biggest subsidiary—Shin Kong Life Insurance—and did not come up with a concrete commitment on how to raise the capital size of the subsidiary. The Shon Kong group also includes a non-life insurance unit.
CTBC’s board held an extraordinary meeting on 20 August 2024, during which it announced plans to publicly acquire shares of Shin Kong, subject to regulatory approval.
Ms Chiu told reporters that CTBC's plans were incomplete and that it had asked the company to provide further documentation for its bid, but not all met the regulator's requirements. However, the regulator still encourages the financial industry to make "benign" mergers and acquisitions that respect market order, she also said.
Bidding battle
CTBC announced on 20 August its bid to launch a tender offer to acquire Shin Kong before Taishin Financial Holdings and Shin Kong held their own board meetings to discuss their merger plan on 22 August.
On that date, Taishin unveiled for the first time its offer for Shin Kong comprising a stock swap in which Taishin would use 0.6022 common shares in exchange for every one common share of Shin Kong Financial. The stock swap translated into NT$11.32 ($0.32) per share based on Taishin's closing price on 22 August.
On 23 August, CTBC announced its tender offer would consist of a combination of NT$4.09 per share in cash and an exchange ratio of 0.3132 common shares of CTBC for every one common share of Shin Kong. The price of the tender offer stood at NT$14.55 based on CTBC Financial's closing price on 23 August.
On 11 September, Taishin said that it would raise its offer for Shin Kong by 25% to about NT$222.4bn ($7bn).
In the midst of the merger battle, Shin Kong said it viewed Taishin as its preferred bidder.
Before yesterday’s announcement by the FSC, the boards of Taishin and Shin Kong had agreed to merge their two companies, with the former to absorb the latter, according to a stock exchange statement lodged last week by Taishin.
The purpose of the merger is to capture growth opportunities, expand the business scale, sharpen competitiveness and improve the management structure and create a new landscape for Taiwan's financial markets, read the statement.
Taishin said that the anticipated benefits of the merger include increasing overall economies of scale, improving revenue mix, sharpening competitiveness and solidifying the company's franchise. The synergy created by the business complementarity will improve its future book value per share and earnings per share.
Estimated date of completion
The merger proposal will be submitted to the competent authorities upon approval by the respective shareholders of each holding company at extraordinary shareholders’ meetings. The merger base date will be decided on after obtaining approval from the FSC. Shin Kong will apply for delisting and dissolution of registration in accordance with relevant regulations upon completion of the relevant procedures. The merger is subject to the approval of the FSC and the consent of the Fair Trade Commission.