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Fubon Financial Holding, known to Taiwanese locals as one of the three largest landlords of Taipei, has agreed to acquire the life insurance arm from ING for a consideration of $600 million. Citi and JPMorgan are ING and FubonÆs financial advisors, respectively.
In a structure that mirrors CommerzbankÆs earlier acquisition of Dresdner Bank from GermanyÆs Allianz Group, where the advisers were Goldman and Lazard, no cash will change hands in this deal. ING will be paid in newly issued shares and tier-two subordinated debt securities of Fubon Financial Holding and end up as a 5% shareholder of Fubon.
After the recent global turmoil in financial markets, the Taiex has tumbled from its height of 9,809 points in October 2007 to just 4,809 points as this article went to press.
Based on the market closing price on Friday, October 17, Fubon FinancialÆs stock will translate to $221 million worth of equity to be allotted to ING. Under INGÆs accounting mechanism, the transaction will appear as a Ç427 million book loss, but release much needed capital.
Upon completion of the merger, Fubon Financial will be the owner of the second largest life insurer on the island, and it will remain the islandÆs biggest non-life insurance company û a title it has held for years. The deal will likely shake up TaiwanÆs insurance market, where Fubon competes with two domestic heavyweights û Cathay and Shin Kong. FubonÆs extensive banking network that spans from Taipei to Xiamen opens up the possibility of æbankassuranceÆ û and may give it an extra edge over newer entrants in this market such as Aviva and Prudential.
In recent months, Taiwan has implemented a series of market reforms under the Financial Supervisory Commission.
Karen Williams, INGÆs spokesperson in Hong Kong, says the transaction is a result of ongoing negotiations that have stretched over a year. It is purely coincidental to the present capital injection into the ING Group by the Netherlands government.
The transaction will not affect ING Investment FundsÆ business in Taiwan. The asset management arm remains a leading house in the Taiwan market.
In China, ING has exemption from the China Insurance Regulatory Commission to hold equities in more than two insurers, a number that the insurance regulation does not usually allow. Speculations have emerged in recent days that the Bank of Beijing is interested in taking over the stakes in INGÆs China insurance JV with the Capital Group.
Williams denies ING has plans to pull out of China.
Fubon, meanwhile, has plans to expand its banking network in Xiamen, and even list in Hong Kong one day, according to comments made by Victor Kung, the groupÆs president.
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