To strengthen competitiveness and enhance operational synergies, China Development Financial Holding Corporation (“CDFHC”) passed a resolution during today’s board meeting (August 12) for a share swap transaction (the “Transaction”), where CDFHC will acquire all remaining outstanding shares of China Life through the issuance of common shares and preferred shares as well as a cash payment to all of China Life’s shareholders. CDFHC will acquire the remaining 44.05% stake from external parties, which excludes the 8.66% stake currently held by KGI Securities. CDFHC’s board also passed a resolution today to hold an extraordinary shareholder meeting on October 1 to discuss the Transaction. The share swap is expected to be completed after being approved by the shareholder meeting and competent authorities. Following that, China Life is expected to become a wholly-owned subsidiary of CDFHC by the end of this year and therefore will be delisted in accordance with the law.
CDFHC stated that achieving 100% ownership of China Life has always been its strategic goal and the share swap transaction enables CDFHC to accelerate this process. Under the Transaction, every common share in China Life will be exchanged for 0.80 common shares and 0.73 preferred shares in CDFHC, and NT$11.5 in cash. This consideration is based on the ex-dividend and ex-rights share price of both parties, taking into account the NT$0.4 cash dividend and NT$0.4 stock dividend per share to be distributed by China Life, and the NT$0.55 cash dividend per share paid by CDFHC on August 10.
PwC Taiwan has been engaged to provide a fairness opinion on the consideration of the Transaction. The consideration per share represents a premium of 17%, based on the 20-day average ex-dividend and ex-rights closing price of China Life (NT$25.42) and CDFHC (NT$13.69) through August 12, and the issuance price per share of NT$10 of CDFHC’s preferred shares. It also represents a premium of 17%, based on the ex-dividend and ex-rights closing prices on August 12. The preferred shares of CDFHC issued in this Transaction will carry an annual dividend yield of 3.55% based on a par value of NT$10 per share. The consideration mix of cash, common shares and preferred shares will allow China Life’s shareholders to respectively receive cash immediately after the share swap, participate in the future business performance of CDFHC and China Life, and receive steady yield from the preferred shares. This caters to three major aspects of value and provides flexibility to China Life’s shareholders. Furthermore, the issuance price of the preferred shares at NT$10 per share allows for more retail participation. The issuance of common and preferred shares will also further help CDFHC to maintain a robust financial and capital position.
This share swap transaction balances the interests of both CDFHC’s and China Life’s shareholders. The proposed acquisition of the remaining shares in China Life will allow CDFHC to create a stronger foundation and further drive collaboration and accelerate growth across its business segments, which includes banking, securities, private equity/venture capital, asset management and insurance.
[Attributes of Preferred Shares]
- Preferred shares have priority over the company’s net income and are paid dividends before common shareholders
- Preferred shares have a higher yield than bank deposit rates
- The preferred shares will be listed on the Taiwan Stock Exchange
- The above attributes make preferred shares an attractive instrument for long-term holding
- Preferred shares is a common instrument issued by other FHCs in Taiwan, such as Cathay, Fubon, CTBC, etc.
