The various boards of directors of the five subsidiaries of Taiwanese financial firm Fubon Group have approved the structure and mechanism of the group's merger into a single financial holding company. The directors of Fubon Securities, Fubon Insurance, Fubon Bank, Fubon Life and Fubon Securities Invesment Trust approved the plan on September 12 and will meet again on September 26 to finalize the details, including the swap ratios.
The first step of the merger process will be to establish Fubon Insurance as Fubon Group and transfer all the insurance business to a new company. Step two will be the exchange of shares in Fubon Bank, Fubon Securities and Fubon Life for new shares in Fubon Group at the swap ratios to be determined on September 26. On the completion of step two, Fubon Securities Investment Trust will swap its shares for new shares in Fubon Group.
The plan has been devised by the group's financial adviser CSFB and an extraordinary general meeting will be called for October 26 for shareholders of the group and its subsidiaries to approve the plan.
CSFB has recommended that the swap ratios for the shares of each subsidiary to be merged into Fubon Group, be based on current market prices, comparable company trading multiples, DCF analysis and appraisal valuations. According to Fubon, "the earning power, capital base and growth capacity of the companies will be taken into consideration."
In a closely fought mandate battle, Merrill Lynch beat off Lehamn Brothers to win the role of independent financial adviser for the four non-insurance subsidiaries of the group. CSFB was mandated on the deal shortly after its successful hosting of its annual investor conference in Hong Kong in April at which Fubon was one of the presenting firms.
Last week, this website erroneously reported that CSFB was awarded the mandate last week and linked it to CSFB's expulsion from the China Unicom mandate. Officials at Fubon stress that this mandate was awarded well before the Unicom announcement and had no political ramifications at all.
The CSFB team is being personally led by David Olson, CSFB's head of investment banking for everywhere in Asia from Japan to Australia including everything in between. According to Fubon, the plan has his personal stamp on it and the speed with which the plan has been put together and enacted is worthy of praise.
Commenting on the plan, Daniel Tsai, Chairman of Fubon Insurance and Vice Chairman of Fubon Group, commentetd that he is confident, "the reorganization would be earnings and net book value enhancing for Fubon Insurance shareholders. I also believe", he added, "that this reorganization would bring good value to the public shareholders of Fubon Bank and Fubon Securities." Tsai is a scion of the Tsai family which is the major shareholder in the Fubon Group companies and with his brother Richard, they together run the group.
The deal will make Fubon Group the first fully integrated financial services provider in Taiwan under the new financial holding company law. According to sources within the group, the merger will enable them to cross sell more financial products to its large customer base in Taiwan. It will also enable the group to pursue a regional expansion policy, buying insurance companies, securities firms and banks across the region. This will be financed by the $4 billion war chest the group has amassed from its sale of 15% of the group to Citigroup late last year as well as retained earnings and reserves.
