| HONG KONG/TAIPEI, June 19
HONG KONG/TAIPEI, June 19 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
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