IBF Financial Holdings Co. has agreed to acquire EnTie Commercial Bank for about NT$33.7 billion (US$1.20 billion) to bring the bank completely under its corporate umbrella, according to the two financial institutions.
At a joint news conference held Thursday, IBF Financial Vice President Andrew Chiu (???) said both sides have scheduled special general meetings for Dec. 2 to discuss the deal before seeking regulatory approval from the Financial Supervisory Commission (FSC).
Currently, IBF Financial runs web-only Rakuten International Commercial Bank, which opened in January to become the first online bank in Taiwan. Rakuten International Commercial Bank is a joint venture with Japan's Rakuten Bank.
IBF Financial, which specializes in short-term commercial paper transactions, is the only financial holding firm without a physical bank in Taiwan.
Chiu said IBF Financial aims to add a physical bank through the acquisition to broaden its services, raise its marketing capability, boost economies of scale and eventually create synergies.
According to IBF Financial, its commercial paper operations post a return on equity of about 10 percent, while EnTie Bank has a ROE of about 6 percent and that figure is expected to increase to 9-10 percent in the future
IBF Financial said after the acquisition the company will own two major sources of earnings.
The deal, the financial holding company said, is expected to boost the company's net worth from NT$38.4 billion to NT$72 billion with total assets of around NT$660 billion, and a total workforce of 3,200 employees, including EnTie Bank's 1,500 staff.
Chiu said IBF Financial held a board meeting Thursday to issue the greenlight to buy EnTie Bank in cash as well through a share swap. Cash will account for 55 percent of the acquisition with the share swap making up the remaining 45 percent.
As for the share swap, Chiu said IBF will issue preferred shares for the acquisition.
Each of EnTie Bank's shareholders will obtain about NT$9.47 in cash and a 0.49 IBF Financial share for an EnTie Bank share they own, Chiu said.
That translates into NT$17.21 for every EnTie share, which represents a 1.2 percent premium over EnTie Bank's closing price of NT$17 on Wednesday and a 6.4 percent premium over the bank's average closing price for the previous 20 trading sessions, Chiu said.
The acquisition price is equivalent to 0.99 percent of EnTie Bank's net worth per share at the end of June and takes into account the value of the bank's common shares estimated by accountants to be worth NT$16.13 to NT$19.02, he said.
Trading in both IBF Financial and EnTie Bank was suspended Thursday before the acquisition was announced later in the day. On Wednesday, IBF Financial ended at NT$15.50.
To finance the acquisition, Chiu said the company will launch a rights issue for its existing shareholders to raise funds, while the financial holding firm has tentatively priced the preferred shares for the share swap at NT$15.70 with a dividend ratio of 3.85 percent.
Those who own the preferred shares will be allowed to exchange IBF Financial shares a year after the acquisition or the financial holding firm will buy back the preferred shares seven years after the transaction, Chiu said.
IBF Financial has promised to retain all of EnTie Bank's employees for three years and protect their rights and benefits, according to Chiu, adding that they will be given special bonuses to encourage them to stay.
In a statement, EnTie Bank said in addition to its employees, the bank's clients and suppliers will have their rights and benefits well protected after the acquisition.
IBF Financial said the transaction could be completed by the end of the second quarter of next year but the deal is still subject to approval from the FSC.
After the transaction is completed, EnTie Bank shares will be delisted from the local main board, the bank said.
Source: Focus Taiwan News Channel