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Standard Chartered's 637 million Taiwan buy makes it one of biggest banks
(Evening Standard (London) (KRT) Via Thomson Dialog NewsEdge) Sep. 29--Standard Chartered today became one of the biggest banks in Asian tiger Taiwan with the $1.2 billion (637 million) takeover of Hsinchu Bank.
The British champion in emerging markets and Asia becomes only the second major western bank after Citigroup to penetrate the Taiwanese market in any significant way.
Hsinchu is mainly a retail bank, with 83 branches in the wealthy Silicon Valley-style region north of the capital Taipei. However, it also offers business banking services, and Standard Chartered hopes to grow both sides of the business. It is considering changing Hsinchu's name to Standard Chartered.
It is chief executive Mervyn Davies's biggest deal since his 2005 takeover of Korea First Bank for $3.3 billion. Since that transaction, he has struck a number of small deals in areas such as Pakistan that totalled about $1 billion but has been holding his fire for a major purchase. He pulled out of the 2.7 billion auction for Korea's biggest credit-card firm last month, fearing the price was getting too high.
"I've been looking for an acquisition in Taiwan for a long time -- as long as 10 years -- but this is the perfect one for us," Davies said.
Standard Chartered will be funding the deal by selling $1.2 billion of new shares. Morgan Stanley, UBS, Goldman Sachs and Cazenove will manage the placing. Its shares today fell 19p to 1378p, valuing the bank at 18.3 billion.
Standard Chartered's timing raised some eyebrows as Taiwanese banks are still smarting from a recent consumer-credit crisis. Banks lost heavily on their credit-card and other unsecured lending operations as customers struggled to pay off debts.
Hsinchu did not emerge unscathed from the rout, losing $95 million before tax in the six months to 30 June as a result. But its lack of exposure to credit and cash cards meant it was far less affected than its peers. It made $191 million of provisions for bad debts in the half-year.
Davies has won the approval of the four powerful Taiwanese dynasties that control the business, the Wu, Chan, Chen and Tsai families. Chief executive CW Wu will stay at the helm of the operation with just over 20 percent of shareholders' backing. Remaining investors must now vote on the deal, which would see the bank bought off the Taipei Stock Exchange. Completion is planned for November.
Hsinchu will be merged with Standard Chartered's small existing Taiwanese business, which opened in 1985 and has three branches and 900 employees. That process will bring savings of about $20 million a year from 2008.
Davies has won plaudits for turning around the company by beefing up its operations in Asian markets. He has also bolstered specialist areas such as private equity and debt capital, which will benefit from backing fast-growing companies in Taiwan's technology belt.
But the biggest boost from the deal will be for Standard's large wealth management business, which will be able to sell its products through the Hsinchu branches.
To see more of the Evening Standard, or to subscribe to the newspaper, go to http://www.thisislondon.co.uk.
Copyright (c) 2006, Evening Standard, London
Distributed by McClatchy-Tribune Business News.
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