M&A

25 November, 2009

UPDATE 1-China Strategic plans to raise stake in Chinatrust

* The $2.15 billion Nan Shan deal awaits Taiwan approval

* China Strategic shares close down 3.4 percent

(Adds comment, detail)

By Rachel Lee

TAIPEI, Nov 25 (Reuters) - China Strategic (0235.HK), the majority buyer of AIG's Taiwan Nan Shan unit, said on Wednesday it would raise its stake in Taiwan's Chinatrust (2891.TW), aiming to remove doubts about its commitment to run Nan Shan.

China Strategic, awaiting Taiwan regulators to approve the $2.15 billion deal, said the stake increase could cement its ties with Chinatrust and boost confidence that China Strategic was able to run Nan Shan, the island's No.3 life insurer.

"We feel it helps to have a Taiwan investor (Chinatrust) with us," Raymond Or, China Strategic's vice chairman and chief executive officer, told reporters. "Both parties are going to work more closely in the future."

His comments came days after Taiwan regulators said they were concerned that China Strategic and its partner Primus Financial were backed by China-sourced funds, complicating the approval process behind the deal.

Officials were also worried that the consortium will not live up to its promise of owning the company for at least seven years.

At worst, Taiwan officials could strike down the acquisition announced in October, dealing a major blow to American International Group Inc (AIG), once the world's largest insurer and now 80 percent owned by the U.S. government after a multi-billion-dollar bailout. [ID:HKG225332]

The planned stake increase in Chinatrust would only exist if the Nan Shan deal got a green light from Taiwan regulators before July 2010, China Strategic's Or said.

Chinatrust Financial, which has agreed to buy a 30 percent Nan Shan stake from China Strategic, would also buy more of Nan Shan, he said.

In exchange for the 30 percent Nan Shan stake, China Strategic agreed earlier this month to take a 9.95 pecent Chinatrust stake via a private placement.

On Wednesday, shares of China Strategic fell 3.4 percent in Hong Kong trading and Chinatrust stocks ended 0.5 percent lower in Taiwan trading. (Writing by Faith Hung; Editing by David Cowell) ((faith.hung@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging: faith.hung.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

Source: http://www.reuters.com