Fubon Financial Holding, the second-largest publicly traded financial group in Taiwan, will buy majority control of First Sino Bank, in what is the largest acquisition of a mainland business by a Taiwanese investor.
The deal, valued at more than US$1 billion, reflects Taiwanese investors' growing interest in tapping the vast mainland market as the two sides consolidate their economic ties.
Fubon Financial, the most aggressive Taiwanese financial company to invest in the mainland, and its subsidiary Fubon Bank, will purchase a combined 80 per cent stake in First Sino for 5.65 billion yuan (HK$6.9 billion) from the existing shareholders, including Pou Chen Group, a Taiwanese footwear and retail company, Hong Kong's Wing Hang Bank and Shanghai Pudong Development Bank.
Following the purchase, Fubon Financial and Fubon Bank will participate in a share placement by First Sino, injecting an additional 800 million yuan into the Shanghai-based lender.
The total transaction value of 6.45 billion yuan will make the deal the largest Taiwanese investment on the mainland.
First Sino also will become the second mainland bank to be partly owned by Fubon, which bought a fifth of Xiamen Bank in 2008. Last year, Fubon also won regulatory approval to set up a joint-venture mutual fund house with Founder Securities, a stock brokerage controlled by Peking University.
The Taiwan company also set up a life insurance venture with Nanjing Zijin Investment Holding in February last year.
Xiamen Bank has extended its reach beyond southeastern Fujian province by establishing a branch in Chongqing and also plans to secure a foothold in Jiangxi and Liaoning provinces.
"Taiwanese investors are actively seeking growth opportunities on the mainland, and the growing operations by Taiwan banks on the mainland could help quicken the pace of expansion," said Ray Lu, a manager at Hotung Ventures, a Taiwanese investment group.
According to Bloomberg, the value of announced acquisition deals between the mainland and Taiwan, has reached a combined US$2.2 billion so far this year, a record high.
First Sino was set up in 1997 to help Taiwanese firms operating on the mainland raise funds. But due to political reasons, no Taiwanese bank bought into a mainland lender until Fubon sealed the Xiamen Bank deal in 2008.
Aside from buying into mainland banks, Taiwanese banks also are launching their own branches on the mainland after the 2010 signing by Taipei and Beijing of a groundbreaking trade and investment pact. About 10 Taiwanese banks have won approval to open branches on the mainland.