(The following statement was released by the rating agency)
Apr 12 - Fitch Ratings says the announced acquisition of KGI Securities (KGI) by
China Development Financial Holdings Company (CDFHC) is unlikely to impact the former's Issuer
Default Rating of 'BBB' with Stable Outlook. KGI will consolidate with Grand Cathay Securities,
CDFHC's securities subsidiary, if the acquisition is successful.
Based on the proposed terms and conditions of the acquisition offer, Fitch
believes that KGI and CDFHC will be able to sustain their standalone financial
strength. The merger should generate scale benefits over the medium-to
long-term, enhancing earnings quality of the merged entity. These benefits,
however, will be counterbalanced by risks associated with integrating the
companies' operating platforms and corporate culture.
In the case of successful acquisition, Fitch believes CDFHC will position itself
as an investment bank with strategic importance on its securities arm. This
shift in focus from principal investments to an expanded and more diversified
brokerage business should enhance earnings stability of the group. The agency
also believes that the acquisition may further induce consolidation of the
securities industry in Taiwan, easing market competition in the long run.
The transaction is subject to regulatory approval and successful tender