(Adds more sourcing, rationale of deal, ranking of players in Taiwan's bancassurance market.)
By Aries Poon and Perris Lee Choon Siong
Of DOW JONES NEWSWIRES
HONG KONG (Dow Jones)
The deal, which values the 30% stake of Nan Shan at US$600 million-US$650 million, comes just a month after China Strategic, in a consortium with Primus Financial Holdings Ltd., agreed to pay US$2.15 billion for a 97.5% stake in the Taiwan unit of American International Group Inc. (AIG).
No cash will change hands from the deal, one person said, although Chinatrust will issue new shares for the transaction, another said. The deal will proceed once China Strategic's acquisition of Nan Shan from AIG is complete, likely before the Lunar New Year holiday in February, another person said.
China Strategic and Primus will first acquire the Chinatrust stake, and then Chinatrust will get the Nan Shan share.
Chinatrust was one of the bidders for Nan Shan, the Taiwan unit put up for sale by AIG earlier this year to raise funds to repay the tens of billions of dollars in bailout money it has received from the U.S. government.
The consortium is 80% held by China Strategic, primarily a battery maker owned by a group of Hong Kong tycoons, and 20% by Hong Kong-based financial services firm Primus.
Taipei-based Chinatrust, which owns the island's largest credit-card issuer and is Taiwan's largest bancassurance services provider, expects to approve the plan at a board meeting as soon as later Tuesday, one person said.
"Through this deal, China Strategic gets a local partner, always a desirable situation for a company," the person said. "Chinatrust has a strong local network and that will help expand Nan Shan's sales network in Taiwan."
Another person said the arrangement could boost Nan Shan's share of Taiwan's bancassurance market. Chinatrust is the market leader with a 30% market share of the market for banks selling insurance. Nan Shan ranks 18th, the person said.
Getting Chinatrust on board with Nan Shan is "the quickest way" for Nan Shan to boost its presence in Taiwan's bancassurance market, the person said.
Earlier this month, Chinatrust said it was studying with lawyers why its offer for Nan Shan, which it said was the highest bid with the best terms, was unsuccessful.
Chinatrust said at the time it wasn't ruling out taking legal action against AIG on the sale. AIG said later the sale was consistent with international practices.
-By Aries Poon and Perris Lee Choon Siong, Dow Jones Newswires; 852-2832-2332; aries.poon@dowjones.com