FSC rejects CTBC's bid for Shin Kong Financial

CTBC had proposed purchasing 51% of Shin Kong Financial.

Taiwan’s Financial Supervisory Commission (FSC) earlier this week rejected CTBC Financial Holding’s bid to acquire Shin Kong Financial Holding through a public tender offer and share swap, reported the Taipei Times.

The FSC stated that the proposal lacked sufficient details to guarantee the interests of shareholders and maintain the stability of the financial market.

FSC Deputy Chairwoman Jean Chiu said that CTBC Financial did not present a comprehensive plan to mitigate potential risks. 

CTBC had proposed purchasing 51% of Shin Kong Financial’s shares on the open market and through a share swap, just one day after Taishin Financial Holding and Shin Kong Financial jointly announced their intention to merge via a full share swap.

The FSC expressed concerns over the use of share swaps, noting that such arrangements tend to create volatility in the share prices of the companies involved.

CTBC also failed to explain how it would finance the public tender offer or manage Shin Kong’s shares if the acquisition fell through. 

Moreover, the proposal lacked a clear commitment to capital increases for Shin Kong Life Insurance Co, the financially strained flagship unit of Shin Kong Financial.

Since 2002, only six of the 195 mergers and acquisitions in Taiwan have used share swaps, Chiu noted. 

The FSC has never approved share swaps for purchasing banks or life insurance companies due to the market instability such deals can create. Mergers, however, are viewed differently, as they require approval from both boards and shareholders, ensuring greater stability.

CTBC’s buyout plan came after Taishin and Shin Kong’s boards had already reached a merger agreement following extensive discussions. 

The FSC also expressed disappointment over the ongoing public disagreements between CTBC and Taishin Financial.

The FSC emphasised that it does not prefer mergers over hostile takeovers but places significant importance on the availability of cash when reviewing hostile bids. In previous cases, buyout targets were typically set at 80% to minimise disputes and ensure operational continuity. 

Taishin Financial and Shin Kong Financial must now seek approval from their shareholders before moving forward with regulatory review.