Mega Sets Sights on Chang Hwa
Taiwan News, Staff Writer
2014-03-17 12:21 PM

Mega Holdings is actively evaluating an acquisition of a state-held bank. Out of the 5 front running targets, it is understood that a report evaluating Chang Hwa Bank will be ready in one month at the earliest.

Mega Holdings management believes that, in order to create policy directives for a bank serving as a bellwether for the Asia region, the best option remains the independent development of Mega Bank and not the acquisition of a state-held bank. If an acquisition is inevitable, Mega Holdings prefers Chang Hwa Bank as opposed to First Financial Holding which is the choice expected by the market.

After removing from consideration the Bank of Taiwan and the Land Bank of Taiwan, state-owned banks required to be independent entities, out of the eight major state-held banks, Mega Holdings can acquire Chang Hwa Bank, First Financial Holding, Hua Nan Financial Holdings, Taiwan Cooperative Holdings, and Taiwan Business Bank.

Mega Holdings management privately assess, out of the 3 major commercial banks, Chang Hwa Bank is more complementary. In addition to positive growth, Chang Hwa Bank has relatively few employees with a lower average age. The addition of these human resources would inject new vitality into Mega Holdings’ older employee pool.

In addition, Chang Hwa Bank has less than half the number of overseas branches as First Bank. For Mega Holdings’ Asian ambitions, acquiring Chang Hwa Bank over First Financial Holding means less overseas branches to integrate and a benefit for overseas market expansion.

Furthermore, Chang Hwa Bank is not a financial holdings institution which simplifies the M & A process. Coupled with factors such as asset quality and equity scale, acquiring Chang Hwa Bank would mean the subsequent expansion of Mega Holdings share capital and an easing of factors such as earnings dilution.

Currently, Mega Holdings has formed a project team with select members from both financial holdings and banking divisions to formulate an evaluation report for acquiring a state-held bank. The first draft will be ready within the month and will be submitted to the Ministry of Finance after revisions and a final report is confirmed.

Regarding First Financial Holding, First Financial Holding subsidiary First Bank is the most profitable of the 3 major commercial banks. However, there is a high degree of overlap in First Bank and Mega Bank’s domestic and overseas locations. First Bank also has a large number of employees and a union with a high sense of autonomy. These factors make First Bank a second choice.

Regarding the other potential acquisition targets, Taiwan Cooperative Holdings and Hua Nan Financial Holdings, Mega Holdings feel that the former has a certain market position and historical burden while the complexity in integrating the latter is high due to the private interest owned by the Lin Ming-cheng family. Thus, the acquisition of either Taiwan Cooperative Holdings or Hua Nan Financial Holdings is not recommended even under the pressure of the Executive Yuan’s state-held bank acquisition policy.

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