FSC Approves Takeover of Nan Shan Insurance by Ruencheng Conditionally

The Financial Supervisory Commission (FSC) announced yesterday (June 9) approval of investment by Ruencheng Investment Holding (literal translation) in Nan Shan Life Insurance, but required the latter to put forth an additional NT$6 billion of cash under a custodian account within 60 days. The deal will be the largest M&A (merger and acquisition) case in Taiwan`s financial industry ever. AIG Group of the U.S. announced in January this year to sell 97.57% stake in Nan Shan to Ruencheng Investment Holding at US$2.16 billion (around NT$62.6 billion). Plus the requirement of the FSC to put forth NT$30 billion of cash or assets with equivalent value, Ruencheng will have to come up with NT$100 billion for taking over Nan Shan. The deal takes a protracted process to materialize, since it involves the interests of 4 million insurance clients of Nan Shan, as well as its 40,000 employees. Previously, AIG decided to sell Nan Shan to Primus Financial Holding, a Hong Kong-based company, whose application for the takeover, however, was turned down by the FSC. Following the proposal of the acquisition application by Ruencheng in Feb., the FSC required in late March the company to put forth NT$30 billion of cash or assets with equivalent value under a custodian account for 10 years, as proof of its financial strength for the management of Nan Shan. Accordingly, Ruencheng provided NT$30 billion worth of securities for deposit under the custodian account. The FSC, however, evaluated that those securities are worth only NT$24 billion and therefore required Ruencheng to put forth additional NT$6 billion of cash. To stabilize the management of Nan Shan, the FSC also required stake owned by Ruencheng in Nan Shan must be put under a trust account entirely, and controlling shareholders, such as Yin Yien-liang of Ruentex Group, must pledge not to transfer or sell their stakes in Nan Shan. Moreover, trading of related parties will be forbidden between Nan Shan and Ruencheng. For instance, Ruencheng and its related parties cannot borrow money from Nan Shan, which, in turn, cannot invest in the securities or realty of Ruencheng and its related parties. Ruencheng is an 80:20 joint venture between Ruentex Group and Pou Chen Group. In the future, Kuo Wen-teh, former Nan Shan chairman, will serve as chairman of Nan Shan. (by Philip Liu)