With High Price Offer, CTBC Shows Determination to Take Shin Kong
United Daily News, August 24, 2024
CTBC Financial Holding Company announced last night that it plans to acquire 51 percent of shares of Shin Kong Financial Holding Company at the price of NT$14.55 (US$0.46) per share (cash and stock swap), which is 16.86 percent higher than Shin Kong Financial's share price. This plan also represents CTBC Financial's largest shareholder Jeffrey Koo, Jr.'s masterpiece after he returned to the board of directors and is the most notable event in financial circles.
CTBC Financial's takeover plan also means that its move is neither impromptu nor an attempt to disrupt the market by hiking the price of its rivaling bidder. Through this takeover, CTBC wants to become Taiwan's largest financial holding company, largest bank, and the third largest life insurance company.
It is unexpected that CTBC Financial's tender offer includes cash and swap of Shin Kong Financial's stocks with CTBC Financial's stocks. This is the first in the case of merger of financial holding companies. In other words, small shareholders can exchange their Shin Kong Financial's stocks with cash and CTBC Financial's stocks.
As a comparison, Taishin Financial Holding Company proposes to swap 0.6022 share of its common stock for one Shin Kong Financial share, meaning Shin Kong Financial's stock value is about NT$11.32 (about US$0.35) per share. CTBC Financial's tender offer price as NT$14.55 (about US$0.45) per share is 30 percent higher than Taishin Financial's offer price. CTBC Financial's plan provides certain incentives to the small shareholders and raises the threshold of other competitors who may wish to join the public tender offer.
Interestingly, the extraordinary shareholders' meeting for the merger of Taishin Financial and Shin Kong Financial will be held on October 9. On the other hand, CTBC Financial has to raise its capital amount because of the tender offer and stock swap, so CTBC has to hold an extraordinary shareholders' meeting on October 11. Therefore, the three financial holding companies will hold extraordinary shareholder meetings within two days.
The deadline for the stock transfer of Taishin and Shin Kong Financials before their extraordinary shareholders' meeting is September 10. The question is whether CTBC Financial can complete its merger before September 10? The answer is negative. Actually, CTBC may not be able to acquire a single share before September 10.
The Financial Supervisory Commission (FSC) will determine whether to approve the tender offer. More important, even if FSC approves the tender offer within 15 working days after the filing of application, the stocks of Shin Kong Financial can only be transferred at one time after the merger. Since CTBC may not be able to acquire a single stock before September 10, what is its intention?
President Rachael Kao of CTBC Financial said last night that she believes FSC will protect the legitimate rights of Shin Kong Financial's shareholders and make decisions according to law and regulations. This means CTBC's tender offer will continue.
According to regulations governing public tender offers, the period of tender offer is between 20 to 50 days. This means even if CTBC fails to acquire enough shares to vote in the extraordinary shareholders' meeting of Taishin and Shin Kong, it will be able to participate in the stock swap of Shin Kong and Taishin.
If CTBC does acquire 51 percent of Shin Kong Financial's shares within the public tender offer period, then it will become the largest shareholder of Taishin Financial. How will the battle extend and evolve is beyond the imagination in the financial circle. How will FSC deal with the division of financial holding companies? And if CTBC does acquire 51 percent of Shin Kong Financial's shares, FSC may not dare to approve the merger of Taishin Financial and Shin Kong Financial. These scenarios may occur and will test the wisdom of FSC.