The Financial Supervisory Commission (FSC) on Thursday said that it would look into Taishin Financial Holding Co’s (台新金控) financial viability if it pushes through with a plan to take over Shin Kong Financial Holding Co (新光金控).
The commission’s statement came after the two financial holding companies clashed over the acquisition plan, ahead of Shin Kong Financial’s board election on June 9.
Shin Kong Financial shares edged up 0.12 percent to close at NT$8.66 in Taipei trading yesterday, while Taishin Financial shares were flat at NT$18.45, Taiwan Stock Exchange data showed.
Photo: Kelson Wang, Taipei Times
Taishin Financial on Tuesday disclosed its letter of intent to acquire Shin Kong Financial, proposing a swap ratio of one Shin Kong Financial share per 0.584 Taishin Financial shares.
Shin Kong Financial board director Lin Po-han (林伯翰) blasted the plan, saying the ratio was unacceptably low.
Saying Taishin Financial last year sent several letters proposing a merger, Shin Kong Financial president Olivia Wu (吳欣儒) questioned whether it has received its board’s approval.
Taishin Financial has not reported the acquisition plan to the FSC, but it is not required at this stage, Banking Bureau Director-General Sherri Chuang (莊琇媛) said on Thursday.
If it is a friendly acquisition, Taishin Financial and Shin Kong Financial could discuss it and file a joint report to the commission, she said.
However, if it is a hostile takeover, the commission would scrutinize Taishin Financial’s capital adequacy, funding resources and merger plan, she said.
“If Taishin Financial plans to execute a hostile takeover, it must purchase all shares of Shin Kong Financial within three years, and the FSC would examine whether its capital adequacy is solid enough for the deal,” Chuang said.
The commission also prefers that Taishin issue common shares rather than preferred shares to fund the deal, she added.
To be able to conduct a hostile takeover, Taishin Financial must have a double leverage ratio of less than 125 percent, and its return on assets and return on equity ratios must be higher than two-thirds of its peers, the commission said.
The commission would also monitor whether Taishin Financial tried to manipulate share prices by releasing its acquisition plan, it said.
On May 16, Taishin Financial president Welch Lin (林維俊) told investors that Taishin Financial has absolutely no role to play in Shin Kong Financial's management disputes.
Shin Kong Financial will be re-electing its board directors next month. According to local media reports, the so-called "reformists" are actively calling for support of their proposals, and foreign institutional investors are expected to issue voting recommendations in coming days which might be unfavorable to those in power.
Regarding Shin Kong Financial’s management disputes, Lin told an online investors conference that there are two factions of board directors within Shin Kong Financial, and they have different demand and are fighting for support. Taishin Financial has no role in this case at all, Lin said, adding that the company would just wait and see the results of the reelection.
In related news, Taishin Financial yesterday said in a filing to the Taiwan Stock Exchange that it would inject fresh capital of NT$6.5 billion (US$211.86 million) into subsidiary Taishin International Bank (台新銀行) to bolster the latter’s financial strength.
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