Chinatrust offer complicates Nan Shan deal

Chinatrust, the island's largest credit-card issuer, had bid to buy Nan Shan from AIG in mid-October, but lost the bid to a consortium led by Hong Kong's Primus Financial Holdings and Hong Kong-listed investment firm China Strategic. The consortium won the bid by offering US$2.15 billion to acquire 97.57 percent stake in Nan Shan.

But just a few weeks later, Chinatrust and China Strategic have signed a memorandum of understanding (MOU), under which the former will pay US$660 million to purchase 30 percent stake in Nan Shan from the latter. In exchange, China Strategic will take a nearly 10 percent stake in ChinaTrust, worth about NT$20.8 billion (US$648 million), via a private placement.

Chinatrust's announcement sent shockwaves through the financial community in Taiwan, even Sean Chen and Huang Tien-mu, director general of the Insurance Bureau under the FSC noted they had never heard of such a deal before it was unveiled.

Chen said the acquisition screening job will become quite complicated as both the Securities and Futures Bureau and the Bureau of Monetary Affairs of the FSC will have to join the Insurance Bureau to screen the acquisition deal, because Chinatrust is a listed financial company and its stake will be taken by foreign funds via a private placement, Chen said.

The transaction was required to be examined first by the Investment Commission of the Ministry of Economic Affairs, and then sent to the FSC for approval.

The FSC head called for responsible persons of relevant financial institutions to keep the consistency of their words, referring to the fact that the Primus Financial Holdings and China Strategic used to publicly claimed that they would engage in long-term operations of Nan Shan Life Insurance for over seven years.

Meanwhile, Chinatrust also told reporters that it plans to acquire a more than 50 percent stake of Nan Shan Life in three years.

Chinatrust's acquisition deal comes after the firm said earlier this month that it had not ruled out taking legal action against the U.S. insurance giant. In mid-October, AIG agreed to sell 97.57 percent of its shares in Nan Shan to the Hong Kong consortium for US$2.15 billion, which, according to ChinaTrust was lower than the bid it made.

Wu Yi-kui, general manager of Chinatrust, said after acquiring a 30 percent stake of Nan Shan Life, the chairperson of Nan Shan will be appointed by the China Strategic consortium, with the chief executive officer to be appointed by ChinaTrust.

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