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Taiwan Life shares down amid fears of buyout failure

TAIPEI, Taiwan -- Shares of Taiwan Life Insurance Co. (台灣人壽) took a beating Thursday morning amid fears that a buyout deal in which CTBC Financial Holding Co. (中信金控) will acquire the life insurer is going to fall apart, dealers said.

Concerns over the fate of the acquisition deal were raised after Long Bon International Co., the major shareholder of Taiwan life, expressed opposition to the transaction, which could harm the life insurer's competitiveness as it will not be able to take advantage of CTBC Financial's broad network to sell products, the dealers said.

As of yesterday, shares of Taiwan Life had fallen 6.86 percent, nearly the maximum daily decline, to NT$24.45, with 1.81 million shares changing hands. The weighted index on the Taiwan Stock Exchange ended up 20.34 points, or 0.22 percent, at 8,944.16.

“Taiwan Life shares gained significantly after CTBC Financial announced the acquisition deal. Now, hopes about the transaction are on the brink of evaporating, so the current heavy losses came as no surprise,” KGI Securities analyst Phil Chu said.

In late October 2013, CTBC Financial announced that it would acquire Taiwan Life through a stock swap. CTBC Financial had planned to use 1.44 common shares in exchange for Taiwan Life shares and to use one special share for one Taiwan Life special share to bring the life insurer under its corporate umbrella. The deal was valued at about NT$26.6 billion.

Stock Swap Deal Expires on April 20

The stock swap had been scheduled to be completed April 20, but Long Bon made a statement to the TWSE that it had decided not to extend the deadline if the deal is not closed by that day, which could lead to the transaction deal falling apart.

Long Bon currently owns a roughly 37-percent stake in Taiwan Life.

The Taiwan Life shareholder will propose its decision not to extend the transaction deadline to a board meeting of Taiwan Life slated for Friday.

“In a saturated life insurance market in Taiwan, Taiwan Life, a mid-sized life insurance company, is faced with an uphill battle in competition,” Chu said. “To Taiwan Life, the acquisition is expected to help the life insurer broaden its insurance product distribution network, but now the deal could break down.”

In 2013, Taiwan Life posted NT$0.51 in earnings per share (EPS), down from NT$2.14 in EPS recorded in 2012.

Tseng Ming-chung (曾銘宗), head of the Financial Supervisory Commission (FSC), said that he will respect the decision of Long Bon and that the FSC will suspend a review of the acquisition application.

Shares of CTBC Financial outperformed shares of Taiwan Life to move higher, despite the possibility of failure of the transaction.

CTBC Financial yesterday added 0.78 percent to NT$19.45 on trading volume of 23.45 million shares.

“Even if CTBC Financial completes the deal to buy Taiwan Life, it remains to be seen whether and when the deal will bring synergies to the financial holding company,” Chu said.

“In addition, CTBC Financial has been a market laggard. Investors simply picked up the stock on its relatively low valuation,” he said.

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