S&P affirms Mega Financial

Standard & Poor's said it affirmed its ratings on International Commercial Bank of China (A/stable/A-1), Chiao Tung Bank (A/stable/A-1) and Chung Kuo Insurance Co. Ltd. (BBB+/stable), operating subsidiaries of Mega Financial Holding Co. Ltd., following Mega's announcement that it will acquire up to 26% of Taiwan Business Bank over the next year at a price of no more than NT$9 per share.

If Mega acquires full control of Taiwan Business Bank and merges it with the Mega banking subsidiaries, the Taiwan government's plan to halve the number of state-owned banks to six will have been achieved.

The impact of the prospective acquisition on the Mega group is limited at this stage, the agency said. The cost is equivalent to about 5% of Mega's long-term investments or shareholders' equity as of the end of September.

Though Mega will have to finance part of this acquisition with debt, the burden should be insignificant given the strong financial profile of the overall group, S&P said. After the acquisition, Mega's double leverage ratio and debt ratio would climb to a still-manageable 110% and 20%, respectively, on a pro-forma basis.

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