UPDATE 1-Yuanta Financial to bid for South Korea's Tongyang Securities

Tue Feb 25, 2014 9:37pm EST

Related Topics

(Adds reported details of Yuanta's bid, background on Tongyang's reason for selling)

By Faith Hung and Joyce Lee

TAIPEI/SEOUL Feb 26 (Reuters) - Yuanta Financial Holdings Co Ltd, the parent of Taiwan's biggest brokerage firm, said on Wednesday it will bid for a controlling stake in Tongyang Securities Inc in the first such merger between Taiwan and South Korea.

Yuanta has submitted a bid of 120 billion won ($111.85 million) for a 27.1 percent stake in existing shares and is expected to invest another 150 billion won in a rights offering, bringing its total stake to about 50 percent, the Korea Economic Daily said, citing unnamed investment banking sources.

Yuanta officials declined to elaborate, while Tongyang Securities officials declined to comment.

Yuanta also put a caveat that it can terminate the contract if Tongyang Securities is found guilty of embezzlement in ongoing court proceedings looking into whether the brokerage's involvement in selling debt issued by affiliates that have since gone bankrupt was illegal, the Korea Economic Daily reported.

Tongyang Securities was put on the block as its affiliates entered court receivership last year after failing to stave off a liquidity squeeze with more than 4 trillion won in total debt. Tongyang Securities was the 11th largest securities brokerage in South Korea as of Sept. 2013 with 8.8 trillion won in assets.

Deloitte is advising the sale.

Yuanta's move comes after Taiwan's top financial regulator, William Tseng, said recently he would encourage brokerages to increase investments overseas in part because the Taiwanese market is crowded and fragmented.

At around 0220 GMT, Yuanta shares fell 0.6 percent, trailing the broader market's 0.4 percent gain. Tongyang shares dropped almost 2 percent, while the KOSPI Index was flat.

($1 = 1072.8500 Korean won) (Editing by Paul Tait and Matt Driskill)

FILED UNDER: