The consortium will acquire a 35% stake in the Taiwanese lender, routing its investment via three instruments: common shares, preferred shares and convertible bonds. Both the common and preferred shares will be issued to Carlyle at a price of NT$17 per share. The price represents a 42% premium to the closing price of Ta Chong on July 9.
Ta Chong has total assets of NT$337 billion across 50 branches in Taiwan and offers a range of banking products. It made a pre-tax loss of NT$103 million in the first six months of calendar 2007. Others in the fray for Ta Chong included MBK Partners of Korea.
The Ta Chong deal follows a spate of banking sector deals in Taiwan. In April, Citi acquired 100% of the Bank of Overseas Chinese for approximately $427 million, in a deal which made it the largest international bank operating in Taiwan. The Citi deal followed Standard CharteredÆs acquisition of Hsinchu International Bank for $1.2 billion in the fourth quarter of 2006.
Most recently, in June, private equity firm Longreach paid $694 million to acquire a controlling stake in TaiwanÆs EnTie Commercial Bank.
The Ta Chong deal is subject to approval by Taiwan regulators.
Private equity players are busy looking for deals in Taiwan because depressed valuations are creating good opportunities and there are industries such as banking which are rife for consolidation. In the past, firms have reaped healthy returns from private equity investments on the island.
But regulators have been scrutinising recent deals closely and it can often be a challenge for a firm to secure the requisite approvals to close a deal. On June 25, buyout firm Oaktree Capital announced it was postponing by one month the deadline for a 100% buyout of Fu Sheng, Taiwan's leading manufacturer of golf club heads, due to delays in necessary regulatory clearances.
Earlier in the year, Carlyle itself abandoned its plans to delist ASE, a semiconductor testing company, citing differences in pricing. Specialists say the deal was also aborted because regulators did not support the transaction or its rationale. Carlyle must be hoping it is luckier this time than it was with ASE.
Morgan Stanley advised Carlyle, while UBS advised Ta Chong.
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