Taiwan's financial regulator vetoes CTBC's takeover of Shin Kong

台灣金管會駁回中國信託收購新光

Financial Supervisory Commission blocks hostile acquisition of leading financial conglomerate


TAIPEI (Taiwan News) — On Monday (Sept. 16), eve of the Mid-Autumn Festival, the Financial Supervisory Commission (FSC) held an impromptu press conference rejecting CTBC Financial Holdings' acquisition of Shin Kong Financial Holdings.

The FSC deadline for reviewing CTBC’s hostile acquisition of Shin Kong was set for Sept. 24, but an early ruling was delivered after just 10 working days as the proposal fell well short of FSC expectations. FSC Deputy Chair Jean Chiu (邱淑貞) presided over the press conference, noting that CTBC will not have the opportunity to appeal the decision.

The FSC ruled the tender offer and stock swap to acquire Shin Kong was incomplete and failed to account for shareholder volatility and the larger stock market. Thus, the FSC could not approve the proposed acquisition, which had not been approved by Shin Kong Financial’s board and was considered a hostile takeover, per UDN.

Chiu added that CTBC’s acquisition plan did not show a proper understanding of Shin Kong Life Insurance’s financial situation. Furthermore, the use of a stock swap and cash offer would not sufficiently protect the rights and interests of shareholders from both parties. Due to these reasons, the FSC did not approve the acquisition.

The FSC added that CTBC’s merger plan included different stock acquisition ratios, with the lower limit of 10% failing to ensure absolute control over Shin Kong Financial. According to the FSC, this could lead to future disputes over equity and operating rights disputes.

Chiu said that CTBC’s acquisition plan was mostly dependent upon a stock swap, which in the case of a hostile takeover can affect the stock prices of both parties, potentially affecting the seller's rights. For this reason, the FSC has discouraged acquisitions primarily based on stock swaps in recent years.

According to the FSC’s Securities and Futures Bureau, of the 195 acquisitions of public companies so far, only six have been executed through stock swaps. Furthermore, there is no precedent for the acquisition of a financial holding company, bank, or life insurance company via a stock swap.

The ruling opens the door for a merger between Taishin Financial and Shin Kong Financial. Such a decision awaits an extraordinary shareholders' meeting scheduled for Oct. 9 by both Taishin and Shin Kong, with ultimate approval again dependent upon the FSC.