TAIPEI, May 18: Private equity firm Carlyle Group and other major shareholders of Taiwan’s Ta Chong Bank plan to sell the bank to Yuanta Financial in a deal worth up to T$37 billion ($1.25 billion), two sources familiar with the situation said on Friday.
Carlyle and the Chen family, which together hold about 70 percent of Ta Chong, would sell their stakes in a share swap that values their holdings at T$17 per share, said one of the sources. A second source said the price was at T$15.
Both sources declined to be identified due to the sensitivity of the matter.
The deal would mark an exit at a profit for Carlyle and also gives it a 7 percent stake in Yuanta, which is shifting its focus back to Taiwan after a move to expand in greater China didn’t pay off. Yuanta is reported to be shopping for an insurance buy in Taiwan and recently acquired a small local brokerage.
‘Yuanta has given up its Greater China dream,’ said an analyst at a U.S. Securities house.
‘It has acquired Polaris’ fund and brokerage businesses to make it even stronger in Taiwan market. But Yuanta is paying a high price for Ta Chong. Even though it’s a tough trade, it can add strength to Yuanta’s current mediocre banking business,’ the analyst said on condition of anonymity as the matter is sensitive.
Carlyle had bought a 35 percent stake in Ta Chong in 2007 for NT$21.5 billion ($729 million), part of a wave of private equity investments targetting a rebuilding of Taiwan’s financial sector after a consumer lending crisis beginning in 2005.
But sources told Reuters in April that Carlyle had hired J.P. Morgan to sell its now around 40 percent stake in the bank, and had been trying to enlist other shareholders in order to sell a controlling stake.
The company was looking to exit a competitive and fragmented Taiwan market where only slow progress had been made in developing potentially lucrative banking ties with China, and which had never produced the returns investors such as Carlyle had sought.
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‘Most of the terms have been settled,’ said one of the sources.
‘The only things left to be worked out are Carlyle’s financing needs and arranging a position for Ta Chong’s chairman in the merged company.’
‘The best thing Carlyle can get is a seat on Yuanta’s board. Carlyle may also want Yuanta to agree to it having a say when Yuanta makes future acquisitions,’ he said.
The other source said that the companies would announce the deal as soon as late this month. Officials of Carlyle and Yuanta declined to comment. Ta Chong’s spokesman said that he is not aware of the share sale.
Ta Chong’s market capitalization stood at about T$24 billion as of Thursday’s close. A T$17 per share offer would value the bank at T$37.1 billion and represent a 44 percent premium over the midday price of T$11.75 on Friday.
Its shares reversed early losses of as much as 3 percent to jump by the maximum allowed 7 percent to T$11.75 after Reuters reported the sale plan, beating the broader market’s 2.6 percent fall.
Shares of Yuanta dropped 3.47 percent.
Yuanta, whose brokerage unit is the biggest in Taiwan, is shifting its strategy focus to the home market as its efforts to tap the China market were not productive due to the slow progress in Taiwan-China banking ties.
Local media have reported Yuanta is looking to buy either of the Taiwan insurance units of Canada’s Manulife and New York Life. Yuanta has repeatedly declined to comment.
J.P. Morgan and Barclays are advising Carlyle, while Morgan Stanley is advising Yuanta, said the source.
Taiwan media have previously reported that Fubon Financial and Yuanta were interested in buying Ta Chong.
(agencies)
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