Credit Agricole's sale of CLSA to CITIC hits snag in Taiwan -sources
HONG KONG/TAIPEI, June 19
HONG KONG/TAIPEI, June 19 (Reuters) - CITIC Securities' $1.25 billion agreement to buy brokerage CLSA from Credit Agricole has hit a snag in Taiwan, according to people familiar with the matter, as regulators resist the plan for a Chinese company to own an entity on Taiwanese turf.
Nearly one year after China's state-backed CITIC Securities agreed to buy the Asian brokerage from France's Credit Agricole SA, the deal still awaits clearance from Taiwan's Financial Supervisory Commission (FSC).
Taiwan contributes less than 5 percent to CLSA's overall revenues, so a rejection by Taiwan would not kill the CITIC deal or impact the asking price, one of the people added.
But a refusal by the FSC to allow CITIC's Taiwan leg of the deal would fly in the face of a renewed pact to allow more cross-straits partnerships between Taiwan and China, and would likely once again create a business wedge between the two sides.
Ties between the two neighbours improved since late 2012, one year after China-friendly President Ma Ying-jeou was re-elected and that gave CITIC Securities the confidence that the deal would get approval.
The CLSA stand-off shows the serious concerns that linger in Taiwan of allowing China a stake in the local economy, a fear that has scuppered several deals in the past and hangs over other announced deals in the financial sector that have yet to win regulatory clearance.
"Taiwan does not allow Chinese securities companies to buy a securities firm here," one FSC official with direct knowledge of the matter told Reuters.
"The most they can own is a 10-15 percent stake for an un-listed brokerage. If CLSA sells its Taiwan business to a Chinese company, that will not meet the regulation," the person added.
The deal has secured approvals from all regulators except Taiwan's FSC, one of the people said.
A Credit Agricole spokeswoman said talks are ongoing with a targeted closing of end-June. The FSC declined to comment.
CITIC Securities said in a statement that regulatory approval of the CLSA acquisition is in its final stages, without commenting directly on the Taiwanese business. "We expect the transaction to proceed according to our schedule," it said.
People familiar with the matter, who declined to be identified as the information is not public, said a deal could be reached at the last minute.
Credit Agricole and CITIC announced the two-part deal last July. CITIC agreed to buy 19.9 percent of CLSA and pledged to buy the rest within months. The deal was conditional on securing all regulatory approvals and set to close around mid-2013.
With the Taiwan end of the deal lagging, Credit Agricole is discussing alternatives, including splitting the Taiwan business along research and sales trading lines, and offloading the sales and trading business to a Taiwanese company, the person said.
"CLSA has told us they are studying a way to split their Taiwan business. As long as they don't sell it to a Chinese brokerage firm, that will meet Taiwan regulations and thus will get an approval," the FSC source added.
In April, Taiwan agreed to ease rules to allow Chinese banks to buy an up to 15 percent stake in local banks and permit more Chinese firms to invest in its financial industry.
Following that announcement, Industrial and Commercial Bank of China Ltd agreed to buy a 20 percent stake in the banking arm of Taiwan's SinoPac Financial Holdings Co Ltd for T$20 billion ($670 million). The deal is waiting for regulatory clearance.
Deals that the FSC has scuppered include its blocking in 2010 of Primus Financial Holdings' bid for American International Group's Taiwan unit on suspicion the deal was funded by China-backed entities.
CLSA was founded in 1986 by Jim Walker and Gary Coull, two former journalists. It operates from 20 cities in Asia as well as in the UK and the United States, employing 1,500 people.
($1 = 29.8570 Taiwan dollars) (Additional reporting by Lionel Laurent in Paris and Elzio Barreto in Hong Kong; Editing by Michael Flaherty and Edwina Gibbs)