(Adds reported details of Yuanta's bid, background on
Tongyang's reason for selling)
By Faith Hung and Joyce Lee
TAIPEI/SEOUL Feb 26 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
($1 = 1072.8500 Korean won)
(Editing by Paul Tait and Matt Driskill)