CTBC Buys Taiwan Life, Tokyo Star in $1.4 Billion Expansion

Nov. 1 (Bloomberg) -- Taiwan’s CTBC Financial Holding Co. agreed to buy Japan’s Tokyo Star Bank Ltd. and Taiwan Life Insurance Co. for a total of about $1.4 billion as it seeks to diversify outside its crowded home market.

The island’s fourth-largest financial company by market value will buy 100 percent of Taiwan Life in a share swap valued at about NT$26.6 billion ($904 million), based on a CTBC share price of NT$19, CTBC President Daniel Wu said at a press conference in Taipei yesterday. The company will also pay 52 billion yen ($529 million) in cash for 98 percent of Tokyo Star, Executive Vice President Rachael Kao said.

In buying the Japanese lender, CTBC Financial follows competitors in expanding outside a home market where competition has squeezed lending margins to the second-lowest in Asia Pacific. Bloomberg News reported the planned Japanese acquisition in July, with two people with knowledge of the matter saying it’s the first takeover of a Japanese commercial lender by a foreign bank. Taiwan Life was the first life insurer established on the island, according to its website.

“Getting a life insurance business could dilute what CTBC is good at because the life insurance business may not generate as high return on equity as the banking business of CTBC,” Jerry Yang, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by telephone. “Global investors generally prefer pure insurers or pure banks, it’s better not growing their life arm too big.”

Shares of CTBC Financial fell 0.3 percent to NT$19.90 in Taipei yesterday before the announcement. Taiwan Life gained 3 percent to NT$26.10, valuing it at NT$24.4 billion.

Kao said the company will seek approval from shareholders at a meeting on Dec. 20, along with regulatory approvals in both Taiwan and Japan. CTBC will issue new shares to fund the purchase of Taiwan Life, according to the statement.

To contact the reporters on this story: Argin Chang in Taipei at achang153@bloomberg.net; Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net