Oct. 9 (Bloomberg) -- Taiwan's Taishin Financial Holdings Co. hired UBS AG to advise on a stake sale that may raise as much as $400 million, replacing bankrupt Lehman Brothers Holdings Inc., three people familiar with the matter said.

Taishin, owner of Taiwan's third-largest credit card issuer, is seeking to sell about 20 percent of itself, one of the people said, asking not to be identified because the matter is confidential. Lehman was given the job of advising on the sale this year.

Lehman's Sept. 15 bankruptcy filing paved the way for other banks to pry clients and employees away from the firm. China's Citic Group hired Morgan Stanley to replace Lehman on advisory services last month, and UBS AG, Blackstone Group LP and Merrill Lynch & Co. have hired senior Lehman bankers even after Japan's Nomura Holdings Inc. agreed to buy its Asia-Pacific operations.

Taishin is seeking capital after speculation about its bank unit's finances prompted depositors to withdraw NT$30 billion ($926 million) in two weeks following Lehman's bankruptcy. Taishin Chief Operating Officer Greg Gibb denied Oct. 1 that there had been a run on the bank, saying half the withdrawals came from companies needing to pay dividends.

Taishin's capital adequacy ratio, a key measure of financial strength, was 9.8 percent at the end of June, above the 8 percent regulatory minimum. The ratio may slide below the threshold because of writedowns, said Andy Chang, an analyst at Taiwan Ratings, the local partner of Standard & Poor's.

Shares Decline

``Taishin definitely needs cash to meet the capital adequacy requirement, especially after the potential writedowns,'' Chang said. ``A strategic buyer will be lured by its good retail market franchise.''

Carol Lai, Taishin's chief financial officer, declined to comment, as did Hong Kong-based UBS spokesman Chris Cockerill and Lehman spokesman Matthew Russell.

Taishin fell 6.8 percent to NT$5.19, the lowest since at least February 2002. The stock has fallen 33 percent since Taishin announced Sept. 16 it has NT$1.8 billion of assets at risk related to Lehman, cutting the company's market value to $912 million.

Taishin's shareholders include buyout fund Newbridge Capital LLC, the Asia unit of TPG Inc., and Nomura, Japan's biggest investment bank.

Possible Buyers

Rather than selling a stake in the parent company, Taishin may seek to sell part of its wholly-owned banking unit, two of the people said.

Aegon NV, owner of U.S. insurer Transamerica Corp., has expressed interest in buying a stake, one of the people said. Aegon has an agreement with Taishin to sell insurance products through its bank branches. Taishin is also approaching private equity firms, the person said.

Aegon bought a 2.5 percent stake in Chang Hwa Commercial Bank from Taishin last year at the behest of the island's financial regulator after Taishin's capital fell short of the required level. The Dutch insurer also formed a life insurance venture with Taishin, taking a 49 percent stake.

Ivanna Huang, a spokeswoman at Aegon Life Insurance Taiwan, a unit of Aegon, deferred questions about Taishin to the parent company.

Taiwan's regulators are probing potential irregularities in merger deals involving finance companies, including Taishin's acquisition of a stake in Chang Hwa.

Chen Shui-bian, who stepped down on May 20 at the end of his second term as Taiwan's president, had encouraged mergers and acquisitions among the island's financial-services firms to promote growth. Prosecutors are examining those deals for possible links to Chen and his family.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

Last Updated: October 9, 2008 06:24 EDT