Consolidation among state-run banks to commence before year’s end

By Ted Chen, The China Post

TAIPEI, Taiwan — The Ministry of Finance’s (MOF) plans to initiate consolidation among a number of state-run banks may commence before the end of this year, beginning with a release of Taiwan Business Bank (TBB, 台企銀) shares held by Mega Financial Holdings (兆豐金控), according to reports. The MOF had listed conformance to a number of principles for the release of TBB shares, stipulating that the transaction may only take place after the election season to avoid impacts to market trading. In addition, the MOF offered First Financial Holding Co. (第一金控) the opportunity to acquire the entirety of the 611.9 million TBB shares held by Mega Financial Holdings. If First Financial Holding declines the offer, Mega Financial Holdings will be instructed to parcel out the TBB shares in portions weighing in at more than 1 percent of the 611.9 million shares.

Most notably, in an effort to avoid disruptive impacts to the price of TBB shares during the deal, the exchange of shares will take place via auctions held after the closing bell. The process is similar to the precedents set in merger deals between state-run banks.

Reports indicate that the release of shares is scheduled to be completed before June of next year before TBB’s shareholders’ meeting.

Currently, Mega Financial is holding a 12.01-percent stake on TBB. Accounting for cash and share dividends paid out by TBB, Mega Financial’s portfolio cost is estimated to fall between NT$9.7 and NT$9.8 per share, representing a difference of about 7 percent between TBB’s closing price of NT$9.33 at the end of yesterday’s session.

Meanwhile, Mega Financial management expressed confidence in completing the release of shares, stating that TBB’s operations are sound, while indicating an upbeat outlook on the company’s share price performance.

In May of 2011, Mega Financial bid to liquidate 460 million TBB shares through an issue of convertible bonds was rejected by the Financial Supervisory Commission. The regulator barred the initiative, as TBB’s share price at the time was deemed to be excessively low. In October of 2012, the regulator imposed a six-month ban on all similar investment activities for Mega Financial.