HONG KONG: China Strategic Holdings claimed yesterday that it will re-submit its application to buy Nan Shan Life Insurance and that it intends to have eventual control over the Taiwan insurer.

Taiwan authorities had earlier returned an application submitted by a group led by Hong Kong's China Strategic and Primus Financial Holdings to buy the Taiwan unit of American International Group (AIG), known as Nan Shan Life Insurance.

The gesture was interrupted by some market watchers and media as a rejection by the Taiwan government of deals that might be funded by mainland investors.

However, Raymond Or, chief executive officer of China Strategic, repeatedly maintained at a press conference yesterday that "the application (document) has been returned, not rejected."

"Maybe there is a different understanding in terms of necessary supporting documents in the application procedure," Or explained, adding "We will submit the application again."

He said China Strategic "intends to have control over Nan Shan, either directly or indirectly," and it will maintain Nan Shan's existing management, operation system and brand name.

The deal triggered a flurry of debate in the merger and acquisition market as soon as it was first announced. Before the deal was made public, China Strategic was a little-known $111 million holding company whose main business was trading battery products. But it teamed up with Primus Financial and won a $2.15 billion bid to buy Nan Shan from global giant AIG.

News of the successful bid pushed shares of China Strategic up over 80 percent.

To make the merger even more complicated, earlier this week, China Strategic sold 30 percent of Nan Shan's stake to Taiwan's Chinatrust Financial Holding for $660 million.

The deal came only a few weeks after China Strategic and Primus Financial bought Nan Shan in a competitive auction in early October, but the selling price of $660 million indicated that the 30 percent stake was priced at roughly the same valuation at which the insurer was initially sold.

"We sold stakes in Nan Shan to Chinatrust Financial at the same price we bought (from AIG), it proves that we are not doing any speculation," Or said.

He said China Strategic had approached many other financial groups and believed Chinatrust Financial could provide Nan Shan with the best complementary cooperation.

However, Chinatrust will acquire the stake only after Taiwan's regulator, the Financial Supervisory Commission (FSC), approves the acquisition of Nan Shan by China Strategic and Primus Financial.

Chinatrust Financial has also negotiated an option to increase its stake in Nan Shan after three years "to the extent agreeable by the parties and permissible under the laws", China Strategic said in a Hong Kong stock exchange filing. Chinatrust representatives were reported to have told media in Taiwan on Wednesday that they are interested in owning at least 50 percent of Nan Shan.

China Strategic will have the right to nominate the majority of Nan Shan's directors, including the chairman of the board. Chinatrust will nominate the CEO, who will report to the board.

The deal between Chinatrust and China Strategic also includes China Strategic's buying a 9.95 percent stake in Chinatrust for $648 million.

(HK Edition 11/20/2009 page3)