Taishin Financial Holding Co.’s proposed sale of its banking unit to Chang Hwa Commercial Bank wouldn’t be in the public interest, Taiwan’s Ministry of Finance said yesterday within two hours of learning of the plan.
The sale is undesirable because it would give Taishin Financial control of Chang Hwa, according to a ministry statement yesterday, which didn’t give a reason for the objection to this outcome. Deputy Finance Minister Tseng Ming-chung said by phone today that “any form” of integration between the two companies would be opposed by the government.
Taishin Financial’s proposal comes within five years of a probe into irregularities surrounding the company’s purchase of a stake in Chang Hwa. Former President Chen Shui-bian had encouraged mergers among the island’s financial institutions to boost growth. Chen was convicted of taking bribes and sentenced to life in prison after leaving office in 2008.
Backing the deal “would imply a huge change in the government’s mindset, because they have been very conservative before and people tend to stay at a talking stage for this kind of acquisition,” said Jerry Yang, a Hong Kong-based analyst at Daiwa Capital Markets Hong Kong Ltd. “If the government can really change its mindset, this would mean government banks would improve efficiency and competitiveness.”
Taiwan had 38 domestic banks as of last February, according to the banking regulator.
Shares of Taipei-based Taishin Financial fell 3.5 percent as of 12:23 p.m. local time, retreating from an 18-month high reached at the close yesterday after a media report on the possible deal. Chang Hwa declined 2.3 percent, while the benchmark Taiex index lost 0.8 percent.
Taishin Financial is Chang Hwa’s largest shareholder with a 23 percent stake, with the ministry second largest at 12 percent, according to data compiled by Bloomberg. Taishin Financial’s earlier plan to buy Chang Hwa was stymied because the political environment changed, Yang said.
“Any merger or acquisition needs negotiation among major shareholders,” Jean Chiu, deputy director-general at the Financial Supervisory Commission’s Banking Bureau, said by phone today. “We would review any application based on related regulations.”
The finance ministry responded at 6:20 p.m. local time yesterday following a 5 p.m. press conference at which Taishin Financial President Joseph Jao said the company would seek the government’s support for the purchase of Taishin International Bank by Chang Hwa.
Tseng, at an earlier press conference yesterday morning, denied that the government had initiated a plan to consolidate Taiwan’s state-invested financial institutions. Taichung-based Chang Hwa said in an earlier statement that its board hadn’t discussed such a deal.
Private-equity firms, whose lock-up clauses on their Taiwan bank stakes are expiring, “might have started finding buyers,” said Chuang Piyen, a Taipei-based analyst at Mega Securities Co. Taishin Financial’s largest shareholder is TPG Newbridge, according to data compiled by Bloomberg.