Reuters: Private Equity: UPDATE 1-Taiwan's Yuanta ends $1.25 bln bid for Carlyle-backed bank

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UPDATE 1-Taiwan's Yuanta ends $1.25 bln bid for Carlyle-backed bank May 25th 2012, 02:06 Thu May 24, 2012 10:06pm EDT * Price, weak stock market may have been stumbling block-analyst * Setback for Carlyle's long-awaited exit * Blow to Yuanta's expansion plan By Faith Hung TAIPEI, May 25 (Reuters) - Yuanta Financial said on Friday it has pulled out of talks to buy Carlyle Group backed Taiwanese bank Ta Chong , dealing a blow to the private equity firm's long-planned exit from a sluggishly performing investment. Reuters reported last Friday that Carlyle was in talks to sell its stake in Ta Chong to Yuanta in a deal worth up to T$37 billion ($1.25 billion) and which would have given it a 7 percent stake in the fast-expanding Yuanta. A Yuanta spokesman declined to elaborate while Carlyle declined to comment. Ta Chong's spokesman said he was not aware of the matter. Ta Chong shares fell by the maximum 6.8 percent allowed on Friday, while Yuanta was up 0.39 percent. One fund manager said the recent weakness in the Taiwan stock market may have been behind the decision to pull out. "Carlyle and Yuanta had been in talks for quite some time. But the Taiwan stock market has been so sluggish and global economy prospects remain weak, making it hard for Yuanta to offer the price that Carlyle asked for," said the chief investment officer of a European-based fund house. "Carlyle is not willing to sell its stake at a loss. It will have to delay the timing for the planned sale. Until when? It all depends on when the stock market improves," the executive said, declining to be identified due to the sensitivity of the matter. Under the original deal, Carlyle and Ta Chong's other major shareholder, the bank's founding Chen family, would have swapped their combined holding of about 70 percent for Yuanta shares. Taiwan newspapers reported on Friday that the parties could not agree on a swap ratio for the deal. The deal had been set at a price of around T$17 per share. Ta Chong shares stood at T$10.95 on Friday. They had reached a high of T$13.50 in March this year. Carlyle had bought a 35 percent stake in Ta Chong in 2007 for T$21.5 billion, and had increased it to around 40 percent. But it had struggled to get the returns it wanted from the investment in the competitive and fragmented Taiwan banking market. The return on assets from banks in 2011 was 0.53 percent, the lowest among banks in Asia excluding Japan. The failed bid is also a blow to Yuanta's plans to refocus on Taiwan, its home market, as efforts to tap the Chinese market have not been productive due to the slow progress on cross-strait banking ties. Yuanta has cut staff at its Shanghai office and at some Hong Kong operations and has yet to set up any China business of its own. The Ta Chong deal would have given it a branch network in Taiwan to boost its own very small one. Local media have reported Yuanta is also looking to buy either of the Taiwan insurance units of Canada's Manulife and New York Life, both of which are currently on sale. It has also been linked with the acquisition of a small local broker. Link this Share this Digg this Email Reprints

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