Yuanta, Fubon compete for stake in Taiwan brokerage

Yuanta, Taiwan’s biggest securities firm, and Fubon, the island’s second-largest financial services company, are in talks to buy the holdings of Lin Yuh-ling, Capital Securities’ biggest shareholder, and related parties, the people said. A deal may value Capital Securities at as much as US$1.4 billion, they said, declining to be identified before an agreement is reached.

Capital Securities controls about 4 percent of Taiwan’s stock trading volume, less than half the share of Yuanta, according to Taiwan Ratings Co. The TAIEX index is Asia’s third- best performing benchmark this year and trading volumes have increased, on optimism the government of President-elect Ma Ying- jeou will bolster ties with China.

“The industry is very fragmented and the way to survive is to increase market share,” said Steven Chen, an analyst at Taiwan Ratings, the local partner of Standard & Poor’s.

Yuanta spokesman Chuang Yu-De and Wu Wenwen, a Fubon spokeswoman, declined to comment. Tony Tan, executive vice president of Capital Securities, said the company “doesn’t rule out the possibility of selling a stake or cooperating with a good company,” declining to identify potential partners.

Lin denied a request for an interview.

The Lin family owns at least 35 percent of Capital Securities through Hong Tai Group, the parent of property developer Hung Sheng Construction Co., said Celia Wang, a Taipei- based analyst at Yuanta Securities Co. Lin hasn’t disclosed his aggregate holdings and owns the shares through different entities and different representatives.

Lin may sell his entire stake for cash or accept shares in the buyer for part of it, the people said.

The bidders may offer NT$26 to NT$28 per share for Capital Securities shares, valuing the company at between US$1.3 billion and US$1.4 billion, the people said. Capital Securities shares rose 4.5 percent Monday, bringing its market value to $1.18 billion. The stock has rallied 51 percent this year.

The range represents about 1.7 times the company’s book value, said Yuanta analyst Wang. She said past acquisitions in the industry have valued the targets at about 1.2 times book value on average. Capital Securities has about 45 branches in Taiwan, she said.

The average daily trading volume on Taiwan’s stock exchange rose to 5.2 billion shares this year from 4.7 billion in 2007, according to data compiled by Bloomberg. The TAIEX index has climbed 2.4 percent this year, even as benchmarks in Hong Kong and mainland China dropped amid the global credit crisis.

Capital Securities was founded by Chief Executive Officer George Chen in 1988 and has operations in Hong Kong and Shanghai. Chen, who’s also the company’s chairman, is the son-in-law of Lin and holds a stake in the company, the people said.

Lin agreed to sell part of his stake in unprofitable EnTie Commercial Bank to Longreach Group, the buyout firm founded by former UBS AG banker Mark Chiba, in June last year. Longreach agreed to pay NT$23 billion for 51 percent of the bank, and has become the biggest shareholder.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email