Cathay Financial terminates deal to acquire bank in Malaysia

2018/04/11 13:14:26 fontsize-small fontsize-default fontsize-big
Cathay Financial terminates deal to acquire bank in Malaysia

Taipei, April 11 (CNA) Cathay Financial Holding Co., one of the largest financial institutions in Taiwan, said Wednesday that it has terminated an agreement to acquire the Canada-based Bank of Nova Scotia's banking assets in Malaysia.

In a filing with the Taiwan Stock Exchange, Cathay Financial said it decided to end an agreement to acquire the Canadian bank's Malaysian subsidiary, Bank of Nova Scotia Berhad (BNSB) because certain terms in the transaction were not fulfilled.

Cathay Financial did not provide further details on exactly why the acquisition fell through as the two sides signed a non-disclosure agreement.

Cathay Financial Vice President Teng Chung-yi (鄧崇儀) told CNA, however, that the acquisition price was not the problem, he said.

In late May 2017, Cathay Financial announced it would spend US$255 million to acquire BNSB through Cathay United Bank and Cathay Life Insurance Co., two wholly-owned units of the Taiwanese financial conglomerate.

Under the agreement reached at the time, Cathay United Bank was to own a 51-percent stake in BNSB and become the first Taiwanese bank to have a subsidiary in Malaysia, while Cathay Life would hold the remaining 49 percent after the deal was finalized.

Foreign banks often have to use acquisition deals to enter the market or expand their presence there because Malaysia's financial authorities carefully control the issuance of licenses for banks to set up branches or subsidiaries, analysts have said.

Several Taiwanese banks have set up representative offices in Malaysia, but they have faced obstacles to upgrade them into branches and secure licenses to provide services, analysts said.

As a result, Cathay Financial planned to acquire BNSB to expand its presence in Malaysia beyond its Kuala Lumpur marketing office, but the deal fell through at the end.

Cathay Financial is not the only Taiwanese financial institution to have tried and failed to acquire a bank in Malaysia.

CTBC Financial Holding Co. was unable to complete a deal in 2016 to acquire a 100 percent stake in Royal Bank of Scotland Berhad, a subsidiary of Royal Bank of Scotland, because of its failure to observe the planned acquisition schedule.

Despite the aborted deal in Malaysia, Wellington Koo (顧立雄), chairman of Taiwan's Financial Supervisory Commission (FSC), told reporters on the sidelines of a legislative hearing that it did not represent a setback for the government's "New Southbound Policy."

The government has been aggressively pushing the policy since the Democratic Progressive Party took office in May 2016 to forge closer economic ties with economies in Southeast and South Asia to reduce economic dependence on China.

Koo said Taiwanese banks still have good chances to acquire assets in the Southeast Asian market, in particular in digital or online banking assets.

(By Tien Yu-pin, Chiu Po-sheng and Frances Huang)

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