The share swap contract between the Hong Kong-led consortium and Chinatrust Financial Holding, one of the biggest financial groups of Taiwan, lapsed on June 25. Following the lapse, American International Group Inc. (AIG) is now hopeful of getting the regulatory approval to sell its Taiwan unit, Nan Shan Life Insurance Co. Ltd. to the consortium.
The consortium, formed by Primus Financial Holdings Ltd., a Chinese investment firm, and a battery maker, China Strategic Holding Ltd., had agreed to buy Nan Shan in October 2009 for $2.15 billion, which AIG needs to pay off its U.S. government bailout money.
However, the deal was stalled due to regulatory concerns in Taiwan such as prohibition of Chinese investments in Taiwan and China Strategic’s long-term political connections with mainland China.
Further, the concerns intensified, when the consortium announced the share swap agreement in November 2009 that Chinatrust would buy a 30% stake in Nan Shan for $660 million from China Strategic, and in exchange would give China Strategic a 9.95% stake in the Taiwanese financial conglomerate.
Taiwan regulators took the share swap as an indication of weak commitment from China Strategic to Nan Shan. However, China Strategic was of the belief that the pact with the Taiwan conglomerate would address these concerns. Besides, Taiwan was apprehensive about the consortium’s inadequate experience to take over such a high profile business.
The consortium claimed that its leaders possess extensive financial experience and also denied its association with the mainland. Moreover, AIG and China Strategic extended the deadline for completing the sale of AIG’s Taiwanese unit by three months to October 2010, in the hope of satisfying the regulators.
Additionally, the consortium also set aside $325 million of the purchase price in an escrow account for a four-year period, which will be utilized from time to time to enhance and maintain Nan Shan’s capital ratios of at least 200%, required by the Taiwan government.
AIG believes that the expiry of the share swap agreement on June 25, 2010, would help reduce the hindrances and political concerns in Taiwan, and would help get the regulatory approval from the Taiwan authorities, though all the necessary information are still pending for submission by China Strategic.
Other than AIG, U.K.’s Prudential plc (PUK) and Dutch financial services groups, ING Groep N.V. (ING) and Aegon N.V. (AEG) pulled out of Taiwan in 2009, while in April 2010, Metlife Inc. (MET) sold its insurance wing in Taiwan.
The consortium, formed by Primus Financial Holdings Ltd., a Chinese investment firm, and a battery maker, China Strategic Holding Ltd., had agreed to buy Nan Shan in October 2009 for $2.15 billion, which AIG needs to pay off its U.S. government bailout money.
However, the deal was stalled due to regulatory concerns in Taiwan such as prohibition of Chinese investments in Taiwan and China Strategic’s long-term political connections with mainland China.
Further, the concerns intensified, when the consortium announced the share swap agreement in November 2009 that Chinatrust would buy a 30% stake in Nan Shan for $660 million from China Strategic, and in exchange would give China Strategic a 9.95% stake in the Taiwanese financial conglomerate.
Taiwan regulators took the share swap as an indication of weak commitment from China Strategic to Nan Shan. However, China Strategic was of the belief that the pact with the Taiwan conglomerate would address these concerns. Besides, Taiwan was apprehensive about the consortium’s inadequate experience to take over such a high profile business.
The consortium claimed that its leaders possess extensive financial experience and also denied its association with the mainland. Moreover, AIG and China Strategic extended the deadline for completing the sale of AIG’s Taiwanese unit by three months to October 2010, in the hope of satisfying the regulators.
Additionally, the consortium also set aside $325 million of the purchase price in an escrow account for a four-year period, which will be utilized from time to time to enhance and maintain Nan Shan’s capital ratios of at least 200%, required by the Taiwan government.
AIG believes that the expiry of the share swap agreement on June 25, 2010, would help reduce the hindrances and political concerns in Taiwan, and would help get the regulatory approval from the Taiwan authorities, though all the necessary information are still pending for submission by China Strategic.
Other than AIG, U.K.’s Prudential plc (PUK) and Dutch financial services groups, ING Groep N.V. (ING) and Aegon N.V. (AEG) pulled out of Taiwan in 2009, while in April 2010, Metlife Inc. (MET) sold its insurance wing in Taiwan.
Although we do not see any significant downside regarding this issue, the Taiwan deal remains uncertain because the extension of the date casts doubts on the successful completion of the deal. We also fear that the buyers might pull out of the venture, should government intervention pose further hindrances.
Read the full analyst report on “AIG”
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Read the full analyst report on “AEG”
Read the full analyst report on “MET”
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