Taiwan plans to tighten tender offer process after KKR deal

Mon Jun 27, 2011 12:18am EDT

* Regulator may ask buyers to form independent committees

* Committees would be tasked with ensuring offers are fair

* Regulator seeking better disclosure and protection for shareholders

* Yageo shares rebound 2 pct, beating broader market

By Faith Hung

TAIPEI, June 27 (Reuters) - Taiwan plans to tighten processes for tender offers to improve information disclosure and better protect minority shareholders in the wake of regulators' rejection of a $1.6 billion management buyout bid of Yageo backed by KKR & Co .

A regulatory official said on Monday that the measures planned would include asking buyers to set up an independent internal committee to assess whether their offer price is fair.

The plan comes after regulators rejected the KKR-backed deal, citing among other reasons insufficient protection of minority shareholder rights. The deal was seen by many as a gauge of how open Taiwan is to foreign takeovers, especially by private equity firms.

"Yageo's management did not fully explain how they came up with the offer price and why it was reasonable," said the official, who requested anonymity as the matter is not public information.

"We hope in future cases buyers will set up an independent committee inside the company to make sure those things get done properly."

Taiwan's regulators have built up a reputation among foreign investors for being picky, especially towards private equity firms, which they see as interested mainly in making a quick profit.

Foreign firms have struggled in a regulatory environment the American Chamber of Commerce in Taiwan recently called "inconsistent".

American International Group needed almost two years to dispose of its Taiwan life insurance arm as regulators rejected one deal and dragged out the review process on a second.

People with direct knowledge of Taiwan's regulators and private equity business said after the KKR deal's rejection that it could mean less involvement by private capital in Taiwan, since many firms might see it as a "gigantic waste of time".

They said that some private equity firms had been waiting for the outcome of the Yageo deal before pushing ahead with their own deals, but it was likely now that those deals would be off the table.

Regulators have denied that the rejection had anything to do with the involvement of private equity, and said it should not hinder foreign interest in Taiwan deals.

But one fund manager disagreed.

"For any M&A deals, any regulatory issue is seen as an interference. Taiwan should limit that as much as possible," said Simon Liu, deputy investment officer of Polaris Group's fund unit.

The review by the securities bureau of the Financial Supervisory Commission, the market regulator, is expected to be completed in days. The findings will then be submitted to an FSC committee for further discussion.

Shares of Yageo rose 2.1 percent on Monday to T$12.20. They had fallen some 22 percent in the last two weeks as doubts over the deal surfaced. The company's founder and KKR had offered T$16.1 a share to buy out the company. (Editing by Jonathan Standing)

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