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Longreach hires Morgan Stanley to explore Taiwan bank exit: source
HONG KONG |
HONG KONG (Reuters) - Private equity firm Longreach Group has hired Morgan Stanley (MS.N) to explore the sale of its majority stake in Taiwanese lender EnTie Commercial Bank Ltd (2849.TW), a source familiar with the matter told Reuters.
Longreach bought nearly 51 percent of EnTie in 2007 for T$18.8 billion ($637 million) amid a rush of private equity deals in Taiwan's banking industry. The value of the stake has dropped to about $440 million based on Monday's closing price.
Longreach has not decided on an exit strategy and there is no process underway to find a buyer, the source added. But the hiring of an investment bank underscores the private equity firm's desire to cash in on its investment.
The source declined to be identified as the decision was not public. Longreach officials were not available for immediate comment. EnTie and Morgan Stanley declined to comment.
The Hong Kong-based firm has previously said it is raising a new fund, targeting $750 million. It received commitments for about $125 million last year.
The sale could attract interest from Japanese and Chinese banks keen to expand their Asian footprint, separate sources said. Still, domestic Taiwanese banks may have an edge over foreign investors, they added.
Most private equity investments in Taiwan's financial sector were aimed at rebuilding the island's financial sector, which was hit hard by a consumer lending crisis beginning in 2005.
Buyout firms such as TPG TPG.UL, Longreach and Carlyle Group CYL.UL hoped low valuations, China's growth prospects and a local consolidation wave would boost investment prospects, but the anticipated benefits have largely failed to materialize.
Taiwanese banks' return on assets in 2011 was 0.53 percent - the lowest among banks in Asia excluding Japan, according to Fitch Ratings in Taiwan. They also have with little in the way of overseas operations to fuel growth.
Some other private equity firms are also planning to exit their bank investments in Taiwan. Carlyle Group, which owns about 40 percent of Ta Chong Commercial Bank (2847.TW), is also mulling sale of its stake in the mid-sized lender.
TPG in December cut its stake in Taishin Financial (2887.TW) to 6.55 percent from 14.82 percent, including selling a 3.45 percent part to Cathay Financial (2882.TW), Taiwan's largest financial holding firm, for $155 million.
The planned sale come even as buyout funds have faced political and regulatory hurdles from their exits in Taiwan.
($1 = 29.4950 Taiwan dollars)
(Reporting by Denny Thomas; Additional reporting by Faith Hung; Editing by Chris Lewis and Daniel Magnowski)
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