Morgan Stanley to acquire additional 5.1% voting share in Taiwan bank

The investment in Chinatrust will be made through the US bank’s Asian private equity arm and its other subsidiaries.

The US Federal Reserve has granted Morgan Stanley approval to acquire an additional 5.1 percent of voting shares in Taiwan’s Chinatrust Financial Holding Company (Chinatrust), according to a Federal Reserve statement.

Morgan Stanley declined to comment. Chinatrust did not respond to requests for comment at press time.
Morgan Stanley will make the acquisition through the open market out of its subsidiaries including Morgan Stanley Private Equity Asia’s Asia III and MS Holdings, the statement said.

Morgan Stanley had a 4 percent stake in Chinatrust in June 2008, Daniel Wu, chief investment officer of Chinatrust told Reuters last August.

This investment will also increase the bank’s indirect stake in US-based Chinatrust Bank to 9.9 percent as well, according to a statement from the Federal Reserve. Chinatrust owns Chinatrust Bank through Chinatrust Commercial Bank, a Taiwan-based subsidiary.

The bank’s investment in Chinatrust Bank would be a passive one, the bank stated. It does not intend to control or exert a controlling authority over Chinatrust Bank. The transaction will be completed in the next three months.

The Federal Reserve noted that Morgan Stanley and Chinatrust Financial Holding Company do not compete directly in any relevant banking market.

Asia III closed on $1.5 billion in October 2007, almost thrice its predecessor which closed on $525 million in 2005. The fund invests in countries such as China, Korea, Taiwan, India, Japan and Australia. Its previous investments in Taiwan include engineering and construction firm CTCI Corporation and another bank E. Sun Bank. 

Over the last few years, other private equity firms have invested in Taiwanese banks. In 2007, SAC Private Capital bought a controlling stake in Cosmos Bank, Carlyle invested in Ta Chong Bank and Longreach Group acquired a majority stake in EnTie Bank. In 2006, Newbridge Capital invested in Taishin Financial Holding.

Chinatrust has total assets of $53.9 billion and is Taiwan’s sixth largest depository organisation. It provides banking and financial services such as investment banking, trust banking and guarantees.