Longreach to exit Taiwan bank after 14-year hold

IBF Financial – the parent of businesses such as IBF Securities, Rakuten International Commercial Bank, and IBF Venture Capital – said in October that it would acquire all outstanding shares in EnTie for NT$9.47 apiece in cash and 0.49 preferred shares in itself. This implies a total consideration of NT$17.2 per share, representing a premium of 1.2% to EnTie’s previous close, according to a filing.

On December 2, the shareholders of IBF Financial and EnTie voted in favor of the deal. IBF Financial financed it through the issue of NT$18.62 billion in new common shares and NT$15.17 billion in preferred shares.

Longreach acquired a 51% interest in EnTie for NT$23 billion in 2007, committing capital from its debut fund, which closed at $750 million the previous year. The private equity firm is currently deploying its third North Asia-focused mid-market buyout vehicle, having closed on $650 million in 2019.

Having assumed management control of EnTie, Longreach turned around the loss-making lender by cleaning up the balance sheet, recruiting new management, and implementing improved internal controls and risk management mechanisms. EnTie returned to profit in the first quarter of 2009.

“We invested to recapitalize and revive EnTie, to create a strongly managed, capitalized, and performing bank, as a sound contributor to Taiwan’s financial system,” said Mark Chiba, a partner and group chairman at Longreach, in a statement. “Despite the unexpected challenges of the global financial crisis and other economic dislocations over the years, these objectives have been fully achieved.”

However, exiting the business was fraught with difficulty. Longreach is not the only private equity investor to face challenges in this respect in Taiwan. Several attempts by The Carlyle Group to sell its minority interest in Ta Chong Bank – acquired the same year Longreach invested in EnTie – were frustrated before Yuanta Financial Holdings completed a transaction in 2015.

Chiba noted that on multiple occasions, promising exit opportunities “were derailed at the behest of narrow interest groups with political influence,” partly through false claims that Longreach’s fund included LPs from mainland China.

“We respectfully ask that the government and its regulatory bodies appropriately protect shareholders, including our investors, and reject interest groups that seek to subvert shareholder democracy and due processes,” Chiba added.

“We again note that our investors were welcomed to Taiwan in 2007 but despite their delivery of commitment and patience they effectively have been locked up in the investment due to political factors.”

EnTie has 50 branches across Taiwan, of which 30 are in the Greater Taipei area. It had total assets of NT$311.5 billion at the end of 2020 and generated interest income for the year of NT$5.38 billion. Revenue came to NT$5.85 billion, down from NT$6.41 billion the previous year, while net income rose from NT$2.01 billion to NT$2.17 billion.

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• Topics
• Greater China
• Trade sale
• Financials
• Taiwan (China)
• The Longreach Group Limited
• Financial Services