Taishin Financial Holding Co., Ltd. : TPG Exits Taishin Financial Holding Stake in US$181.5 Million Share Sale - Term Sheet
07/05/2012| 01:14am US/Eastern
-- TPG Group sells its entire interest in Taiwan-based Taishin Financial Holdings
-- The sale is the latest exit by private equity from the island's saturated banking sector
-- Analysts say private equity firms are disappointed with industry's poor profitability
(Adds background in 2nd-3rd and 7th-9th paragraphs, Taishin executive's comment in the 6th paragraph, analyst's comment 10th-11th paragraphs.)
By Isabella Steger and Jenny Hsu
TPG Group has sold its entire interest in Taishin Financial Holding Co. (2887.TW) for around US$181.5 million, according to a term sheet seen by The Wall Street Journal, six years after the private-equity firm first invested in the Taiwanese consumer-focused lender.
Private-equity firms have been exiting their investments in Taiwanese banks--or attempting to do so--as the island's lenders are among the least profitable in Asia. Market saturation has pushed interest margins down to the very low single digits, while tough capital requirements imposed by the island's regulator in recent years have also hurt.
Some bankers have said dismal earnings growth and share price performance have forced foreign investors to sit on their investments, exit without making profits or even suffer losses.
In the latest deal, TPG sold 492.14 million Taishin shares at 11 New Taiwan dollars each, a 6.38% discount to the bank's closing price of NT$11.75 Wednesday, in an accelerated bookbuild, according to the term sheet. In an accelerated bookbuild, shares in an already listed company are sold in the open market in a short time and after the market closes.
The lender's shares closed 3.0% lower at NT$11.40 Thursday.
Taishin Chief Financial Officer Welch Lin said for most foreign investors, progress in resolving Taiwan's overbanking problem has been much slower than they were expecting when they initially invested, prompting many to lose interest in the market.
TPG bought a 22.3% stake in Taishin in March 2006 at NT$18.00 per share, at a time when rising defaults forced the bank to seek investors to shore up its balance sheet. The last time TPG trimmed its holdings was in December when it reduced its stake from 14.82% to 6.55%. Another Taiwanese bank, Cathay Financial Holding Co., bought a 3.45% stake from TPG at the time.
Earlier this year, Taishin said George Soros' Quantum Partners Inc. and Nomura Holdings Inc. had also sold their entire stake in the company in 2011.
In May, a Carlyle Group LP-led consortium shelved its plan to sell a controlling stake in Taiwan's Ta Chong Bank Ltd. because the offers from potential buyers didn't meet the seller's expectation.
KGI Securities analyst Fang Wen-yen said TPG's pullout was no surprise because Taiwan banks have continued to struggle with profitability in recent years despite the government's pledge to overhaul the industry.
"These private-equity firms are likely disappointed that the financial sector hasn't benefited from the cross-strait detente," she said, referring to efforts by the two sides to increase cross-strait banking ties such as by raising investment caps and allowing lenders to set up branches in each other's jurisdictions.
Nomura Holdings Inc. was the sole bookrunner on the latest deal.
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