Buyers Of AIG's Taiwan Life Assets Face More Regulatory Hold-Ups

Buyers of American International Group Inc.'s [18540] Taiwanese life insurance unit, Nan Shan Life Insurance Co. Ltd. [86003], are facing more hurdles in the regulatory review process for the deal in Taiwan.

Chinatrust Financial Holding Co., which plans to buy a 30% stake in Nan Shan, has had an application to privately place 2.5 billion new shares to fund the purchase rejected by Taiwan's banking regulator.

The Financial Supervisory Commission's banking bureau rejected the application after Chinatrust failed to provide further information which the regulator had requested on Sept. 28, said Chinatrust in a statement.

Chinatrust will re-submit the application, said the Taiwan-listed financial conglomerate, which has businesses in banking, credit cards, securities, insurance brokerage and asset management.

The application for private placement of new shares was originally submitted in early September when Chinatrust was seeking to buy Nan Shan from AIG in a bidding battle against other buyers including China Strategic Holding Ltd., the eventual bid winner.

Chinatrust's plan to purchase the 30% stake in Nan Shan from China Strategic will not be affected by the banking bureau's rejection, said Vanney Cho of Chinatrust's public relations division. The transaction is still in the process of regulatory reviews and approvals which involve various government units in Taiwan.

On Nov. 17, Chinatrust reached an agreement with China Strategic to acquire 30% of Nan Shan with the aim to develop Chinatrust's bancassurance business.

Under the deal, Chinatrust will buy 30% of Nan Shan from China Strategic for US$660 million while the Hong Kong-listed China Strategic will obtain a 9.95% share in Chinatrust through a subscription of 1.17 billion shares of Chinatrust's common stock at NT$17.74 (US$0.55) per share (BestWire, Nov. 18, 2009).

The deal is subject to regulatory approval for the exchange of securities.

At the same time, Taiwan's Ministry of Economic Affairs Investment Commission said it asked the buyers, led by Hong Kong-based China Strategic and Primus Financial Holdings Ltd., to submit more documents for review.

The Financial Supervisory Commission, Taiwan's financial services regulator, said the buyers of Nan Shan have to show consistency related to long-term commitments to the Taiwanese market.

The consortium led by China Strategic and newly established Primus won the bidding to acquire 97.57% of Nan Shan for US$2.15 billion, with Primus holding a 20% stake and China Strategic the remaining majority (BestWire, Nov. 10, 2009).

With 24 branches across Taiwan, Nan Shan has more than 8 million policies and 4 million customers. Its total assets stood at NT$1.6 trillion in September 2009. The transaction will not affect the insurer's liability and services to policyholders, said Nan Shan. The insurer's assets and investments are monitored by the regulators. The buyer promised to keep the company's existing agent network and business structure after the transaction, said Nan Shan.