CTBC Financial Holding Co. Interested in Acquiring Mega Financial Holding Co.: Divergent Stock Price Reactions

By admin Apr 18, 2024

“Financial markets have been rocked by significant news, with reports suggesting that CTBC Financial Holding Co. (2891-TW) is considering acquiring Mega Financial Holding Co. (2809-TW), with a proposed ‘dowry’ estimated at around 560 billion New Taiwan dollars. CTBC Financial Holding Co. has stated that it does not comment on market rumors regarding specific cases. However, the two companies showed different performances today (April 18), with financial stocks boosting the market, and CTBC Financial Holding Co. rising nearly 1%, while Mega Financial Holding Co. experienced a significant drop, hitting the limit down.

According to media reports, Mega Financial Holding Co.’s Chairman, Dai Cheng-zhi, feels that due to his advancing age and the unfavorable environment for independent bank operations, coupled with the lack of interest from the Tsai family, which owns the Mega Financial Group, in managing a bank, there is a willingness to exit if the acquisition price is reasonable. Based on publicly available information, Mega Financial Holding Co.’s current market capitalization is around 616 billion New Taiwan dollars, with a net worth of 501 billion New Taiwan dollars as of the end of last year (2023). Reports suggest that CTBC Financial Holding Co. has made an offer ranging from 500 to 530 billion New Taiwan dollars. However, CTBC Financial Holding Co. has declined to comment on market rumors regarding specific cases.

Taiwan’s stock market fluctuated today, initially opening lower and briefly testing the 20,000-point mark. However, financial stocks played a significant role in supporting the market, with tech stocks like TSMC also rebounding, helping the market turn positive. Fubon Financial Holding Co. and Cathay Financial Holding Co. reversed losses to gains, with funds flowing into Yuanta Financial Holding Co., E.Sun Financial Holding Co., and other financial stocks, all rising by more than 1%. Additionally, securities firms such as Yuanta Securities Co. and Uni-President Securities Corp. showed significant gains.

CTBC Financial Holding Co. performed well throughout the trading session, reaching a high of 31.9 New Taiwan dollars, with an increase of approximately 1.26%, reclaiming the monthly average and the ten-day average, although it has not yet returned to the monthly average. As for Mega Financial Holding Co., selling pressure was heavier today, with a drop of over 5% at one point, hitting a low of 52.2 New Taiwan dollars.

Mega Financial Holding Co.’s board of directors has proposed a cash dividend of 3 New Taiwan dollars per share, with a payout ratio exceeding 50%. Dai Cheng-zhi stated that the main consideration is whether the net worth and liquidity are sufficient, hoping to improve Mega Financial Holding Co.’s return on equity (ROE) by returning profits to shareholders for more effective utilization, aiming to no longer be a stingy bank. Mega Financial Holding Co. reported a first-quarter unaudited net profit of 2 billion New Taiwan dollars, marking the third-highest record in history, with earnings per share of 1.82 New Taiwan dollars.”

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