The Longreach Group, a private equity firm with offices in Japan and Hong Kong, has agreed to to acquire a control stake in EnTie Commercial Bank in Taiwan in a transaction worth NT$23 billion ($692 million; €520 million).
The deal, subject to regulatory approval, involves the injection of NT$18.8 billion worth of new capital and the purchase of 442 million secondary shares worth NT$4.2 billion from Hung Tai Group, the bank’s major shareholder. Hung Tai has also agreed to subscribe to NT$11 billion in convertible bonds issued by EnTie, according to a statement.
Longreach will hold 51 percent of the bank and have majority seats on EnTie’s board as well as the rights to make senior management appointments.
Prior to entering into Taiwan, the $750 million largely Japan-focused fund manager had made two investments in Japan, one in 2005, and another last year.
The EnTie Bank transaction is however Longreach’s largest investment to date. Mark Chiba, the firm’s chairman and partner, told PEO it would not be for long.
Chiba denied the investment was a departure from its Japan focus and the firm was “more than occupied in Japan” a market where foreign buyout firms have struggled to do deals.
He said: “From the start, Longreach had planned to grow a global private equity business out of Japan.”
Chiba also said that this is not Longreach’s first deal outside Japan as the fund has invested in a mainland Chinese company that deals with building material, together with a Japanese strategic partner.
Longreach is putting together a co-investment vehicle with some existing limited partners as well as new investors to fund part of the investment.
The firm has been looking at Taiwan’s financial service sector for a couple of years before getting into the private non-auction process to acquire a control stake in EnTie, which, according to Chiba, is a groundbreaker because it is the first time a private equity firm has been successfully negotiated to acquire control of a Taiwanese bank, although final regulatory approvals are pending.
Taiwan has proven to be a more accessible market than mainland China for many private equity firms. Longreach’s investment follows that of several large transactions completed in the past twelve months by Newbridge Capital – rebranded TPG Capital – The Carlyle Group, MBK Partners, Oaktree Capital and KKR.