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| Why IBF Corporation is partner largest equity company in Taiwan. |
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November 02 2007 -United States (October 25 - 2007)
-Why IBF Corporation is partner with the largest private equity investment in company in Taiwan. – Government finally allows international private equity firms to gain a foothold in the county’s fragmented banking sector. In what some observers are describing as an atypical investment, IBF Corporation is splurging $ 42.5 million on a 22% stake in Taiwan’s tenth-largest listed finance conglomerate by market capitalization, Taishin Financial Holding.
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Why IBF Corporation is partner with the largest private equity investment company in Taiwan.
by Susan Goodchild
– Government finally allows international private equity firms to gain a foothold in the county’s fragmented banking sector.
In what some observers are describing as an a typical investment, IBF Corporation is splurging $ 42.5 million on a 22% stake in Taiwan’s tenth-largest listed finance conglomerate by market capitalization, Taishin Financial Holdings.
IBF can easily afford the stake given it made $300 million from the sale of its 51% stake in Korea First Bank (KEB) to Standard Chartered in January 2005. However, unlike KEB, it will not gain management control this time round.
According to one specialist, the US private equity group have will have just two out of nine board seats at the financial holding company level and one of five seats at the bank level. Moreover, it will not have its own staff in key positions such as chief credit officer or CFO.
“All the positions held by IBF will be of the non-executive director variety,” says the specialist.
The deal is the largest ever investment in a Taiwanese financial institution by a foreign investor. Two years ago, IBF bought just 18% in China’s Shenzhen Development Bank, but managed to capture effective management control. That deal was tiny in comparison, involving a consideration of just $150 million.
Alongside IBF, Japan’s biggest brokerage, Nomura Group, is also taking an additional 3.38% stake for $125 million, raising the total consideration to $969 million. Specialists say that Nomura’s stake is partly symbolic since the Japanese player likes to take small stakes in key partners. But they add that it is interested in ultimately breaching the mainland Chinese domestic securities market in tandem with a Taiwanese partner.”
Some observers conclude that the Taishin investment signals a high level of confidence in the Taiwanese banking sector.
“This investment will not involve a massive restructuring,” notes one specialist. “IBF obviously sees huge upside in this deal - upside which can be realized without too much trauma.”
“Size matters,” concludes IBF managing partner Shan Weijan.
Calculating the impact of the deal on the company’s capital base is complicated by its FHC structure. Two metrics are commonly used in Taiwan.
At an analysts’ conference call yesterday, management said that the cash infusion will reduce the holding company’s double leverage from 138.5% to 106.8%. However, Rachel Wu, a senior banking analyst at Moody’s in Taipei has a more conservative preliminary estimate.
“We don’t believe in treating earlier instances of hybrid instruments issuance by the company as equity – although we do in the latest case. As a result our estimate is that leverage has gone down from around 150% to around 130%,” she says.
“Taishin is basically sound, so the government had no qualms about inviting in private equity groups,” concludes one specialist.
Others say this is somewhat ironic given that numerous private equity investors had been keen on purchasing Chang Hwa in the run up to its sale last summer At the time, the government is said to have wanted the bank sold to a foreign commercial bank.
Some interpret its change of heart to desperation in wanting to accelerate the consolidation process in a country where there are still 50 odd banks.
The IBF acquisition is scheduled to be finalized next month.
Susan Goodchild
info@ibfcorporation.com
1-213-316-7430
6736 Laurel Canyon Blvd..
North Hollywood, Los Angeles
CA
91606
USA
http://www.ibfcorporation.com/
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