S.A.C. Private Capital, GE Capital to Exit Taiwan Bank --Update

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S.A.C. Private Capital, GE Capital to Exit Taiwan Bank -- Update


By Aries Poon

TAIPEI--S.A.C. Private Capital Group LLC and GE Capital agreed to sell their majority stake in a small Taiwanese bank, Cosmos Bank, to a midsize local financial conglomerate, the Taiwanese companies said Monday.

The deal, if approved by Taiwan's financial regulator, will be the latest foreign investors' exit from the island's crowded banking sector. The most recent deal was TPG Capital, which sold down its stake in midsize bank Taishin Financial Holding Co. at a "small loss" in 2012.

According to filings, S.A.C. Private Capital Group operates out of the same Connecticut offices as SAC Capital Advisors LP, the U.S. hedge-fund firm that last year agreed to plead guilty to criminal charges of insider trading. An SAC spokesman was not immediately able to comment on their current relationship.

On Monday, Taiwan'sChina Development Financial Holding Co. said it would buy the entire Cosmos Bank. It offered 0.2 CDF share and cash of 13.40 New Taiwan dollar(US$0.44) for every Cosmos share held. Based on Monday's closing price--CDF at NT$8.70 while Cosmos Bank NT$15.55--CDF's offer price represents a 2.6% discount to Cosmos Bank shares.

S.A.C. Private Capital and GE Capital bought a combined 82% stake in 2007 for US$900 million, when Taiwan badly needed foreign capital to shore up its banking sector battered by an upsurge of credit-card defaults that began in late 2005. The Taiwanese companies didn't say on Monday how much the stake is valued, but Reuters reported earlier Monday it was sold for US$760 million. An S.A.C. Capital spokesman didn't have an immediate comment. A GE Capital spokesman declined to comment.

In recent years, some of the world's biggest private-equity firms and hedge funds, such as Carlyle Group and Longreach, also had attempted to unload their stakes in Taiwanese banks. Those deals were thwarted at the end because they weren't satisfied with the price offered by potential buyers, according to people with direct knowledge.

In the wake of the financial crisis, GE has been slimming down its GE Capital unit by selling assets such as stakes in international banks and real estate holdings. Later this year, GE is expected to sell a stake in its North American retail finance operations through an initial public offering.

When those investors acquired stakes in small to midsize Taiwanese banks in the last decade, they had hoped local banks would have bigger access to China's fast-growing market as the two economies grew closer.

However, Taiwanese banks still are facing restrictive rules in expanding in China despite a rapprochement across the Taiwan Straits after Taiwan President Ma Ying-jeou took office in 2008. Taiwanese banks are also too small to effectively compete against China's state-owned banks, while competition also has intensified as the country opened doors to more foreign players.

At home, profitability in Taiwan's banking sector is still one of the lowest in Asia. Nearly 40 domestic banks and 30 foreign banks cater to a population of 23 million, driving margins to razor-thin levels.

Regulatory hurdles have made exits more difficult, which may be why it was hard to find buyers, some bankers have said. Taiwan's regulators are known to reject bids they see as linked to companies on the mainland, bankers said.

In 2010, for instance, the Financial Supervisory Commission rejected the winning bid for American International Group Inc.'s Taiwan life-insurance unit. That bid was submitted by a Hong Kong-based consortium that included China Strategic Holdings Ltd. and private-equity firm Primus Financial Holdings Ltd.

The regulator said it wasn't convinced the consortium had sufficient financial strength or a commitment to Taiwan's insurance sector. Bankers directly involved in the deal said the regulator was concerned that some of the potential buyers had close links to Beijing. China Strategic and Primus denied such links.

Rob Copeland and Kate Linebaugh contributed to this article.

Write to Aries Poon at aries.poon@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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