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INTERVIEW-Longreach in no hurry to exit Taiwan bank stake
July 2, 2012 / 6:52 AM / 5 years ago

INTERVIEW-Longreach in no hurry to exit Taiwan bank stake

* Longreach: banking environment tough, to take time to find buyer

* Does not anticipate regulatory problems in EnTie sale

* Sees potential in Taiwan for private equity firms

By Faith Hung

TAIPEI, July 2 (Reuters) - Private equity fund Longreach Group is in no hurry to sell its stake in Taiwan’s EnTie Commercial Bank (2849.TW), saying it will take its time amidst a tough environment for the banking sector to find the right buyer for its “crown jewel” investment.

Longreach, which bought a 51 percent stake in EnTie for T$18.8 billion ($630 million) in 2007, began the sale process this year, joining other private equity firms in looking to exit investments in Taiwanese banks.

But they have run up against a weak market and pricing issues in a crowded and mature Taiwan banking industry.

A source told Reuters recently that Longreach was looking for T$30 a share, which would value any deal at about $1.2 billion [ID:nT8E8FR00K]. Entie shares closed Monday up 0.75 percent at T$13.35 in a broader market .TWII up 0.67 percent.

“We want to get the maximum value and the right buyer. That’s more important than rushing ... What we want to do is to have a successful investment,” Longreach Chairman Mark Chiba told Reuters in an interview at EnTie’s headquarters in Taipei on Friday.

“Obviously the international environment for banking is very tough right now.”

Chiba declined to comment on what price would reflect fair value, saying only that Longreach won’t sell for a loss.

A flurry of private equity deals were struck in Taiwan’s banking industry between 2005 and 2007, though tough operating conditions have meant that many of those deals did not produce the kind of returns some investors had expected.

Taiwan’s banks operate in a crowded market and have little in the way of overseas operations to fuel growth. Their return on assets in 2011 was 0.53 percent, the lowest among banks in Asia excluding Japan, according to Fitch Ratings in Taiwan.

Private equity fund Carlyle’s plan to sell its stake in Taiwan’s Ta Chong Bank 2847.TW, acquired around the same time as Longreach bought into Entie, fell apart in May when the potential buyer, Yuanta Financial (2885.TW), pulled out of the deal that was worth up to $1.25 billion.[ID:nL4E8GP09G]

But Newbridge Capital [NB.UL] in December did cut its stake in Taishin Financial (2887.TW) to 6.55 percent from 14.82 percent.


Chiba, a 47 year-old Australian and a career investment banker who worked at Credit Suisse, S.G. Warburg and UBS before setting up Longreach with a Japanese partner, said Taiwan provides a lot of potential for private equity firms, citing its ties with mainland China and Japan.

He said that Longreach is focused on industrial, financial services, business services and consumer sectors, mainly in Japan but also Taiwan.

And despite the issues around selling the Entie stake, Chiba also sees potential in Taiwan’s banks, betting that they will benefit from what he sees as more integration between the economies of Japan, Taiwan and China.

Chiba said he does not have a problem with Taiwan’s famously picky regulators, who view private equity firms as only after short-term gains and as agents of instability.

Regulators have been particularly tough with private equity and financial sector deals, taking two years to clear AIG’s (AIG.N) sale of its Taiwan insurance arm after deeming the original candidates unfit.

“We brought blue-chip foreign capital here on the assumption that if we do the right thing, and behave professionally, and obviously we’ll be treated professionally and fairly,” Chiba said.

“And we’ve seen that’s going to be the outcome. So we are not concerned.”

But in a nod to regulators’ concerns and their oft-stated desire that buyers of financial firm be stable and in it for the long term, he said Longreach is not a “rush in, rush out” private equity firm.

”We’ll only propose to regulators blue-chip banks,“ either domestic or overseas players.”

($1 = 29.8850 Taiwan dollars)

(Additional reporting by Emily Chan; Writing by Jonathan Standing; Editing by Edwina Gibbs)

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