SAC Private Capital acquires Taiwanese bank at a steep discount(2)

SAC Private Capital, the private equity arm of a US hedge fund group, has acquired a control stake in Cosmos Bank at a discount, saving it from government receivership.

SAC Private Capital, the private equity arm of US hedge fund group SAC, and GE Money are injecting a combined $900 million for an 80 percent stake in Taiwan’s Cosmos Bank.

The two groups are buying shares and bonds at NT$2 per share, which represents a discount of about 63 percent to Cosmos’ closing price of NT$5.47 on the Taiwan Stock Exchange on 31 August, the last day of trading before the bid, the Financial Supervisory Commission (FSC) said at a press briefing in Taipei.

Under terms of an agreement, SAC will invest $650 million in new preferential shares and convertible bonds to improve the troubled bank’s financial structure, according to a statement from Cosmos. GE, which held a 10 percent stake in the bank prior to the latest injection of fresh capital, will pump in $250 million for new common shares and corporate bonds.

“We welcome the deal and understand the efforts made by Cosmos to improve its financial situation by issuing new shares,” FSC spokeswoman Susan Chang was quoted as saying on Taipei Times, a local daily.

Cosmos had been under heavy pressure to find a suitor to help it recapitalise to make up for losses it suffered due to defaults of its consumer credit loans.Cosmos managed to clinch the deal on a deadline set by the FSC, after which it faced a possible government takeover.

Chang also said the financial regulator hoped Cosmos would sign definitive agreements with SAC and GE within one month to inject much-needed capital into the bank. After the deal, SAC would hold more than 50 percent of Cosmos’ shareholding, she said.

The latest investment into Cosmos marks yet another acquisition in Taiwan’s fragmented and overcrowded financial sector by financial sponsors. Bain Capital was reportedly vying for a stake in the troubled lender. Private equity groups that have acquired Taiwanese banks include The Carlyle Group, The Longreach Group and TPG Capital.