Taiwan’s Taishin Financial Holding Co is seeing a tougher path to completing a merger with Shin Kong Financial Holding Co even after its raised offer, because of a potential counterbid by rival suitor CTBC Financial Holding Co.

Still, the Taiwanese company is confident of gaining shareholders’ approval for its new proposal, president Welch Lin said, pointing out that share prices of the three listed firms change quickly and that Taishin’s new offer is similar to CTBC’s bid at this stage. 

“The process for a friendly merger is very rigorous and open to the public,” Lin said in an interview on Thursday. While CTBC can easily increase its offer again, Taishin needs to secure shareholders’ approval to do so, he added.  

The board of Shin Kong, Taiwan’s fifth-largest financial conglomerate, has agreed to merge with Taishin. But it’s facing a hostile merger proposal from CTBC Financial Holding Co which offered about US$4.1 billion cash and stock offer for a 51% stake in Shin Kong to create the island’s biggest finance group. 

Taishin raised its offer on Wednesday, valuing Shin Kong at NT$14.18 per share, or about NT$243 billion, 25% higher than its original stock swap proposal. The new offer represents a nearly 7% premium to Shin Kong’s closing price on Thursday, but still below CTBC’s offer of NT$14.55 in cash and stock.

Shares of Taishin, Shin Kong and CTBC all fell on Thursday, with Taishin and Shin Kong both dropping over 1%. Lin said Taishin will file its revised proposal to the Taiwan Stock Exchange within the day and it will be put to a shareholders’ vote on Oct 9.

“The new offer will likely put pressure on CTBC,” Citigroup Inc analyst Michael Zhang wrote in a note. CTBC’s tender offer could now look less appealing to Shin Kong’s shareholders, and it may need to increase it further, he added.

Taishin and Shin Kong’s founders are brothers and come from Taiwan’s wealthy Wu family. Taishin has argued that both companies share a similar culture that would make any merger transition run smoothly.  

Shin Kong, with businesses across insurance, brokerage and underwriting, had an uneven financial performance during the pandemic, but swung to a first-half profit of NT$20.5 billion from a loss a year earlier. And while the company was earlier this year reprimanded after its life insurance unit’s capital ratio fell below the 200% minimum, it has since rebounded.

Taishin plans to integrate Shin Kong’s financial businesses first into the new company, followed by banks and brokerage, and then the insurance unit by early 2026, Lin said, citing a new insurance capital requirement by regulators by then.

There will be a limited capital gap for Shin Kong’s life insurance business by end-2025 due to capital gains and other investments, in contrast to an initially assessed deficit of about NT$100 billion, Lin added.

Lin dismissed concerns that Taishin taking over its bigger rival Shin Kong would lead to more uncertainties. “We are a healthy company that will rescue another company in danger,” he said, adding that previous management issues at Shin Kong can be addressed after the merger.

In 2020, Shin Kong’s then-chairman Wu Tung-chin was suspended from his role at the life insurance business for poor internal controls that led to a NT$27.6 million fine for the unit. He continued to intervene in the firm’s operations, prompting another fine in 2022 and a regulatory call for its management team to operate independently. 

Taishin’s chief reiterated that the company won’t cut jobs within three years if the merger comes through but will allow employee attrition.

The takeover battle for Shin Kong has heated up in the past weeks with both potential buyers claiming their plans are better for its shareholders. Any deal for Shin Kong would be the first financial holding transaction in Taiwan since Fubon Financial Holding Co acquired Jih Sun Financial Holdings Co in 2022. 

Taiwan’s Financial Supervisory Commission and Fair Trade Commission will need to clear whoever wins the takeover contest, but a merger could help ease competition in a crowded market. 

Taiwan’s 23 million people are served by roughly 70 banks, with more than a dozen financial holding companies offering services from banking to insurance. Analysts have long called for mergers to create larger lenders that could compete regionally.

“It would be great if the regulator adopts looser supervision when it comes to mergers,” Lin said.

  - Bloomberg