The transaction will be effected via a cash-out merger at a price of NT$11.80 per share in cash, subject to closing adjustments. Citigroup says it expects the transaction to be accretive in its first year.
Citigroup has secured buy-in from a group of major shareholders including Polaris Securities, Far Glory Life Insurance and APEX International, who will support the Citigroup offer at the BOOC shareholder meeting.
Citigroup will integrate its own Taiwan operations with BOOC as part of the merger. The combination will create a business with 66 branches and assets of $22.8 billion, making it the largest international bank and 13th largest among all domestic Taiwan banks by total assets.
BOOC started its existence in 1961 as a private commercial bank. It had assets of $8.5 billion, loans of $5.5 billion and a deposit base of $7.0 billion as of September 30, 2006.
Robert Morse, CEO of Citigroup markets and banking in the Asia-Pacific, says the acquisition will significantly strengthen Citigroup's Taiwan presence. ôThe deal reflects our ability and desire to complement our robust organic growth plans in the Asia-Pacific region with strategic acquisitions."
The deal comes soon after CitigroupÆs announcement on March 14 that it will launch a tender offer for the 95.1% of Nikko Cordial it does not already own. Citigroup will spend up to $13.3 billion to cement its presence in Japan.
Citigroup is the second foreign bank to acquire a Taiwanese bank, following Standard CharteredÆs acquisition of Hsinchu International Bank for $1.2 billion in the fourth quarter of 2006. Analysts estimate that Citigroup is paying around 1.3 times 2007 book value for BOOC. Standard Chartered paid around 2.3 times book value for the larger Hsinchu, which had assets of $12.7 billion and 83 branches. The deal was transformational for Standard Chartered, which had only three branches in Taiwan and a $2.9 billion asset base.
M&A bankers have been predicting banking consolidation in Taiwan for a while. Morgan StanleyÆs Rohit Sipahimalani told FinanceAsia recently: ôTaiwan is a great example of a market with too many banks, suggesting a wave of merger activity could be imminent.ö HSBC and ABN AMRO are other banks reported to be examining acquisition opportunities. The country's financial services sector is also on the radar screen of financial sponsors who see an opportunity to buy cheaply as the earnings and valuations of companies are depressed by recent credit card woes.
Citigroup did not use an external advisor.