The Financial Supervisory Commission (FSC) yesterday rejected Thailand-based Charoen Pokphand Group Co’s (CP) application to acquire a 24 percent stake in Jih Sun Financial Holding Co (日盛金控), as the regulator aims to prevent industrial enterprises from taking control of the nation’s financial conglomerates.
To enforce the separation between industry and finance to prevent conflicts of interest, the commission has been scrutinizing non-financial companies’ applications to purchase a stake of more than 10 percent in the nation’s 16 financial conglomerates, Banking Bureau Deputy Director-General Huang Kuang-hsi (黃光熙) told a news conference in New Taipei City.
The Thai conglomerate, which submitted its application in August, has interests in multiple industries, such as packaged food, property development, e-commerce, retail and the telecoms industry, the commission said.
CP had said that it would adopt some measures to ease the commission’s concerns, such as cutting its shareholding in the next few years or appointing professional managers at Jih Sun.
However, the commission was not assured, as CP would still have strong control over Jih Sun, bureau Director-General Sherri Chuang (莊琇媛) said.
The commission also has doubts over whether CP would keep its promise to sell the shares, Chuang added.
CP had planned to fully acquire Capital Target Ltd (CTL, 建群投資), a Hong Kong-based private equity fund, which owns a 24.09 percent stake in Jih Sun, through its British Virgin Islands-registered CT Sunrise unit, Chuang said.
Instead of directly buying Jih Sun’s shares from CTL, CP likely chose to acquire CTL to counter another major shareholder, Japan-based Shinsei Bank Ltd, which has a 35.49 percent stake in Jih Sun, Chuang said.
Under a priority agreement CTL signed with the Japanese lender in 2009, Shinsei Bank must ask for CTL’s permission first if it plans to sell its shares in Jih Sun to other companies.
Meanwhile, CP had said that it would use its own funds to conduct the acquisitions, Chuang said.
The commission said it examined the group’s public documents and found that CP has no Chinese investors or staff, she said.
It is the first time that the commission has rejected a non-financial firm’s application to invest in a financial conglomerate because of concerns over conflicts of interest between the financial firm and affiliated industrial companies, Chuang said.
CP is the parent company of Charoen Pokphand Enterprise (Taiwan) Co (CP Taiwan, 台灣卜蜂), which focuses on producing safe poultry.
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