Pedestrians walk past a branch of Fubon Financial Holding Co in Taipei. The company said the proposed deal will enhance management efficiency and reduce fees and expenses incurred with the listing. Maurice Tsai / Bloomberg

Taiwan-based firm offers HK$1.47b or HK$5 per share to buy local unit

Fubon Financial Holding Co, Taiwan's second-largest financial services company by market value, said it will offer HK$1.47 billion to privatize its unit, Fubon Bank (Hong Kong) Ltd, in a bid to cut costs.

The parent company will pay HK$5 per share for the 25 percent stake it does not yet own in the Hong Kong-listed bank unit, Taipei-based Fubon Financial told the Hong Kong stock exchange Monday.

Trading in the shares of Fubon Bank was suspended Monday. The stock closed at HK$3.79 Friday in Hong Kong.

The transaction will enhance management efficiency as well as effectively reducing fees and expenses incurred with the listing in the city, Fubon Financial said in a statement, adding that it considers the offer price to be reasonable.

"But small investors would probably not agree with them," Linus Yip, strategist from First Shanghai Securities told China Daily. "HK$5 per share, though more than 30 percent higher compared with the last traded HK$3.79, is still well below the historical high and could also be underneath many individual investors' (original) buying price."

The stock peaked to close at HK$8.96 on May 2, 2008, amid the popularity in the city of bank stocks on the back of an upsurge of acquisitions between a number of mainland banks and smaller local banks, according to Yip.

He added that since the share's record high is almost 80 percent greater compared with the offer of HK$5 per share, there could be quite a number of investors who would lose out under the current proposal. He said that it is too early to say whether the move to take full control of Fubon Bank will succeed or not.

Fubon Financial also indicated in the statement to the stock exchange that the proposed privatization is only a possibility as it is subject to the satisfaction of certain conditions and may not proceed.

Yip nevertheless believes that privatization could be helpful for the group to reduce its huge listing cost in Hong Kong, since apart from going public there are still many other business platforms for Fubon to finance.

Fubon Bank currently owns 24 retail outlets, including 22 branches and two securities services centers in Hong Kong. Fubon Financial acquired a 75 percent stake from the bank's former shareholders, Arab Banking Corporation and China Everbright in April 2004, according to its official website.

The bank earned HK$153 million in profit for the six months ended June 30, 2010, up 51.5 percent from HK$101 million a year earlier.

In August 2010, Fubon Bank admitted that it was involved in transferring some customers' personal data to unconnected insurance companies for marketing purposes. It is the first bank to have admitted the trading of client information. According to the Hong Kong Monetary Authority, six banks in the city had sold the personal data of 600,000 clients to insurance companies for marketing purposes over the past five years.

China Daily

(HK Edition 01/11/2011 page3)