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Fubon Financial to raise NT$36 billion through preferred stock sales

Fubon Financial to raise NT$36 billion through preferred stock sales

Taipei, April 8 (CNA) Fubon Financial Holding Co., one of Taiwan's largest financial holding companies, aims to raise NT$36 billion (US$1.11 billion) in funds by issuing 600 million preferred stocks as part of an effort to boost its working capital and strengthen its capital structure.

The issuance of the planned preferred stocks by Fubon Financial, which owns the flagship insurance entity Fubon Life Insurance Co., to issue preferred stocks, is not expected to boost the financial holding company's capital size and dilute its earnings per share.

Data on the Taiwan Stock Exchange showed that Fubon Financial currently has a paid-in capital of NT$102.34 billion. The company posted NT$3.05 in earnings per share in 2015 on a diluted basis, compared with NT$3.38 recorded a year earlier.

According to Fubon Financial, it has set the issue price at NT$60 (US$1.85), which represented more than a 50 percent premium over its closing price of NT$39.3 seen on the Taiwan Stock Exchange on Thursday.

After the announcement of the issuance price, shares of Fubon Financial gained 0.76 percent to close at NT$39.60 on the local main board Friday, while the weighed index ended up 0.6 percent at 8,541.50 points.

In the first seven years after the issuance, Fubon Financial will pay a 4.1 percent annual yield based on the issuance price, much higher than an average 1.2 percent interest rate for three-year deposits offered by banks in Taiwan. After the first seven years of the issuance, Fubon Financial will redeem the preferred stocks at the issuance price, and then adjust the yield for those stocks it does not redeem, the company said.

Fubon Financial said that it will assign 10 percent of the planned preferred stocks to the public and an additional 15 percent to its employees for subscription, while the remaining 75 percent will be reserved for subscription by the company's existing shareholders. The preferred shares are scheduled to be listed on the local market on May 31.

Market analysts said that Fubon Financial is expected to use the funds raised from the preferred stock sales to boost its coffers for future cash dividend payouts. Fubon Financial issued NT$3 in cash dividend per share to shareholders for 2014, so analysts said that to maintain such a high cash dividend for 2015, the financial institution needs to raise about NT$30 billion, analysts said.

In addition, Fubon Financial is expected to use the new funds to finance an acquisition of a 20 percent stake in Fubon Bank (China).

Fubon Financial is not the only large-sized financial institution in Taiwan to announce fund raising plans this year. In March, Cathay Financial Holding Co. announced a decision to raise NT$50 billion, as it considered the options of making a rights issue, issuing preferred stocks or selling global depositary receipts.

The funds will be used for future acquisitions and mergers for expansion, Cathay Financial said. The fund raising plan is pending approval from shareholders at an annual general meeting scheduled for June 8. (By Tien Yu-pin and Frances Huang)

Updated : 2022-05-18 18:09 GMT+08:00