Landmark Taiwan bid sparks hope of more financial deals to come

[TAIPEI] Taiwan's stalled efforts to consolidate its splintered banking industry received renewed impetus as one of the island's biggest financial groups announced a milestone bid to buy a smaller rival.

Fubon Financial Holding Co plans to acquire a controlling stake in Jih Sun Financial Holdings Co. in a tender offer that could be worth as much as NT$49 billion (S$2.27 billion), Fubon said in a statement Friday.

The takeover would be the first time a financial holding company has acquired a direct rival in Taiwan, representing progress in the government's decades-long efforts to make its overbanked industry more competitive. It's the latest sign that consolidation may be gaining momentum, after Taishin Financial Holding Co and China Development Financial Holding Corp announced separate deals to acquire insurance companies since August.

Starting Tuesday until Feb 1, Fubon is offering NT$13 per Jih Sun share, representing a 24.8 per cent premium over its average price over the past month. Jih Sun jumped 9.6 per cent on Monday to close at NT$12.

Fubon's bid may pave the way for further deals, according to Li Fang-kuo, chairman of Taipei-based President Capital Management. "Taiwan has suffered from overbanking for a long time as the financial industry focuses purely on the domestic market with a limited contribution from overseas," he said by phone Monday.

Mr Li pointed to Shin Kong Financial Holding and Taishin Financial as among the most likely companies to combine in the future.

Acquiring Jih Sun's securities business is likely the main attraction for Fubon and represents a good bargain, Daiwa Capital Markets analyst Frank Fang wrote in a note Friday.

After some initial progress, Taiwan's efforts to promote consolidation in the financial industry have slowed in recent years. The island had more than 500 firms in the sector in 2000, when the government amended the law to make it easier to group them under holding companies.

There are currently 36 banks and 16 financial holding companies in Taiwan, according to data from the Financial Supervisory Commission.

BLOOMBERG