Citigroup Inc. has announced that it will acquire Taiwan’s Bank of Overseas Chinese for 14.1 billion New Taiwan dollars (US $426 million), to create Taiwan’s largest foreign bank by assets, since the U.S. financial giant points towards expanding its overseas business. The group has proposed an all-cash deal, which was reached after prolonged negotiations that lasted nearly a year. Citigroup has offered NT$11.8 per share, to acquire the Taiwan lender, marking 4.9 percent higher premium than the stock’s last closing price. The deal also reminds the fact that it’s the third takeover deal since December last year in Asia announced by Citigroup.
In the meanwhile, Overseas Chinese bank has announced that it has ended a 10-year agreement with New York Life Insurance Co. eliminating the crucial obstruction that has prevented the bank’s sale to Citigroup. New York Life was persuaded to settle the agreement it signed with Bank of Overseas Chinese in 2005 before it agrees to sell its 4.5 percent stake in the bank to Citigroup. According to the agreement, New York Life had purchased the stake in the Taiwanese bank, and the bank in turn was committed to sell insurance policies only from New York Life.
The acquisition will expand Citigroup’s network in Taiwan five-times to 66 branches since the government has blocked banks from opening new outlets to foster mergers in the industry. The takeover is anticipated to be completed in the second half of this year. Citigroup will establish a holding in Taiwan to have possession of Overseas Chinese, and the stock will be de-listed from trading.
Citigroup is vigorously taking measures to expand consumer banking in Taiwan to compete with overseas rivals including Standard Chartered. In addition, Citigroup is strategically expanding in Taiwan following the fact that the banking industry has recovered from a bad-debt crisis, as the country’s economy grew 4.6 percent last year. The firm has maintained that the unit will focus on wealth management and credit cards to begin with.
