MasterLink Securities shares soar after buy-out deal

Taipei, Shares of MasterLink Securities Corp., one of Taiwan's leading brokerages, moved sharply higher on Wednesday morning after Shin Kong Financial Holding Co. announced it will bring the securities firm fully under its corporate umbrella.

The buying largely reflected the more than 18 percent premium over MasterLink's closing price on Tuesday offered by Shin Kong Financial to acquire the brokerage's outstanding shares, dealers said.

As of 11:36 a.m., shares of Masterlink Securities had risen by the daily maximum 10 percent to NT$11.10 (US$0.38) with 125.58 million shares changing hands.

Shares of Shin Kong Financial, however, were down 4.00 percent to NT$12.00 as the broader market continued to move lower.

The weighted index on the Taiwan Stock Exchange was down 0.40 percent at 10,536.71 amid concerns over volatility on Wall Street.

The stock attracted strong buying soon after the market opened as investors were encouraged by the deal that would see Shin Kong Financial raise its stake in MasterLink Securities to 100 percent from the current 33.45 percent, dealers said.

Under the deal, MasterLink Securities shareholders will be able to exchange one common share for 0.96 Shin Kong Financial shares.

The stock swap represented an 18.8 percent premium over MasterLink Securities' closing price of NT$10.10 on Tuesday, when Shin Kong Financial ended at NT$12.50. The acquisition is expected to cost Shin Kong Financial about NT$13 billion.

"It was no surprise that MasterLink Securities shares jumped today as the premium was attractive," Hua Nan Securities analyst Henry Miao said. "But the acquisition price could set a ceiling for the stock."

At a news conference Tuesday, Shin Kong Financial Vice Chairwoman Lee Jih-Chu (???) said MasterLink Securities has 960,000 customers and an extensive line of businesses including stock brokerage, wealth management, underwriting, proprietary trading and bond trading.

She said the acquisition is expected to create positive synergies because MasterLink Securities, which ranks as the sixth largest brokerage firm in Taiwan, has few businesses that overlap with Shin Kong Financial's portfolio of financial services.

After the acquisition, Lee said, Shin Kong Financial is expected to see its paid-in capital rise by NT$10.3 billion to NT$116.7 billion after issuing new shares and its capital adequacy ratio rise 3 percentage points to 121 percent.

Shin Kong Financial said the buy-in deal is expected to help the company strengthen its business model, founded on offering comprehensive services in three major business areas: banking, insurance and securities.

As of the end of last year, the book value per share of Shin Kong Financial and MasterLink Securities was NT$13.87 and NT$13.73, respectively, meaning the acquisition price for the brokerage firm is lower than its book value per share.

Source: Focus Taiwan News Channel