Date of announcement 2021/08/12
Time of announcement 20:37:50
Date of events
2021/08/12
To which item it meets
paragraph 11
Statement
1.Type of merger and acquisition (e.g.merger, spin-off, acquisition, or share transfer):Share swap
2.Date of occurrence of the event:2021/08/12
3.Names of companies participating in the merger and acquisition (e.g., name of the other company participating in the merger, newly established company
in a spin-off, acquired company, or company whose shares are transferred):
China Life Insurance Co., Ltd (China Life).
4.Trading counterparty (e.g., name of the other company participating in the
merger, company spinning off, or trading counterparty to the acquisition or
share transfer):China Life common shareholders excluding
China Development Financial (CDF)
5.Whether the counterparty of the current transaction is a related party:
Yes
6.Relationship between the trading counterparty and the Company (investee
company in which the Company has re-invested and has shareholding of XX%),
explanation of the reasons for the decision to acquire from or transfer
shares to an affiliated enterprise or related party, and whether it will
affect shareholders’ equity:
Including subsidiary KGIS’ 8.66% ownership, CDF owns 55.95% of
China Life. The share swap is extended to all China Life
common shareholders other than CDF, including related parties of
the Company. The Company may not refuse related party participation
in the share swap. Transaction terms are identical for all
participating parties, and the transaction satisfied supermajority
vote requirements at the Board meeting.
7.Purpose of the merger and acquisition:
To further establish a comprehensive presence in the financial industry,
enhance business operations, and expand our asset portfolio, we intend
to acquire China Life through share swap as a 100%-owned subsidiary.
8.Anticipated benefits of the merger and acquisition:
If the share swap is successfully completed, China Life will become
a 100%-owned subsidiary of CDF. In the future, the subsidiaries under
CDF will carry out more comprehensive cooperation, enhance business
synergies, pursue rapid business growth, provide diversified financial
products to strengthen customer engagement, and integrate group
resources to promote ”Digital First” initiatives. Combined with our
efforts in process improvement and the introduction of automated tools,
we will continue to enhance business efficiency and create maximum
benefits for employees and shareholders.
9.Effect of the merger and acquisition on net worth per share and earnings
per share: CDF is committed to enhancing business operations and
increasing return on shareholders’ equity. We expect the acquisition
of China Life as a 100%-owned subsidiary to benefit BVPS and EPS
in the long term due to economies of scope from business synergies.
10.Share exchange ratio and calculation assumptions:
1)Share exchange ratio: The share exchange ratio is calculated
based on ex-dividend/rights prices and shares of CDF and China Life.
The consideration mix per China Life share consists of three
instruments, NT$11.5 plus 0.80 shares of CDF common shares and
0.73 shares of CDF preferred shares.
2)Calculation assumptions: Based on the valuation report and
fairness opinion of the share swap transaction prepared by PwC.
11.Whether the CPA, lawyer or securities underwriter issued an unreasonable
opinion regarding the transaction:No
12.Name of accounting, law or securities firm:
PricewaterhouseCoopers Taiwan(PwC)
13.Name of CPA or lawyer:Hsiao-Fen Huang
14.Practice certificate number of the CPA:FSC number 5380
15.Estimated date of completion:
1)The transaction will be submitted for competent authority
approval upon approvals by both CDF and China Life EGMs;
2)Share swap date is to be resolved at Board meetings of
CDF and China Life following competent authority approval;
3)China Life will apply for delisting after relevant
procedures are completed.
16.Matters related to the assumption of corporate rights and obligations of
the dissolving company (or spin-off) by the existing or newly-established
company:Not applicable
17.Basic information of companies participating in the merger:
CDF is a financial holding company mainly operating in
investment and financial management related businesses.
China Life is an insurance company with a focus on life insurance.
18.Matters related to the spin-off (including estimated value of the
business and assets planned to be transferred to the existing company or new
company.The total number of shares to be acquired by the spun-off company
or its shareholders, and their respective types and no.Matters related to
the reduction, if any, in capital of the spun-off company)(note: not
applicable for announcements unrelated to spin-offs):Not applicable
19.Conditions and restrictions for future transfer of shares resulting from
the merger and acquisition:Not applicable
20.Other important terms and conditions:
1)Share swap ratio：If approved at EGMs of both CDF and
China Life and by competent authorities, the share swap
will follow the consideration mix of NT$11.5 plus 0.80
shares of CDF common shares and 0.73 shares of CDF preferred
shares per China Life share, subject to share swap ratio
adjustments as specified in Article 4 of the share swap agreement
(“the Agreement”). Total consideration offered by CDF has
already taken into account cash and stock dividends announced
by China Life. New shares to be issued by CDF will be calculated
in accordance with the consideration mix based on total China Life
shares issued as of the share swap date less shares already owned by CDF.
2)Adjustment to the share swap ratio：Unless otherwise provided in
the Agreement, if any of the situations of Articles 4.1.1 to 4.1.2 of
the Agreement occurs during the period from the Execution Date to
the Share Swap Effective Date, the Parties agree to adjust the
Share Swap Ratio in accordance with the agreed formula without
being required to convene a shareholders meeting for resolution.
Each Party shall submit to its shareholders meeting for resolution
that, unless otherwise provided in the Agreement, if any of the
situations of Articles 4.2.1 to 4.1.4 of the Agreement occurs during
the period from the Execution Date to the Share Swap Effective Date,
the board of directors is authorized to reach an agreement on the
adjustment to the Share Swap Ratio as soon as practicable and
complete the adjustment to the Share Swap Ratio within 10 business
days from the occurrence of any of such situation without being required
to convene a shareholders meeting for resolution
3)The share swap transaction and agreement are subject to approvals by
respective EGMs of CDF and China Life and competent authorities.
21.Any objections from directors to the transaction:No
22.Whether the transaction involved in change of business model:No
23.Details on change of business model:Not applicable
24.Details on transactions with the counterparty for the past year and the
expected coming year:CDF acquired 1,000,000K China Life common shares
at NT$ 23.6 per share in February 2021.
25.Source of funds:
1)Cash from subsidiary upstream distributions, issuance of corporate bonds,
and short-term bridge loans;
2)Expect to issue 2,074,568K common shares; and
3)Expect to issue 1,893,044K preferred shares at NT$ 10. The annual dividend
yield of newly issued preferred shares is 3.55% (Estimated 7yr-IRS rate on
issue date 0.75%+2.80%).
4)The figures above are based on ex-dividend/rights prices and shares of CDF
and China Life. The actual number of common shares and preferred shares to
be issued by the Company shall be calculated in accordance with the
consideration mix for the share swap, based on total China Life shares issued
as of the share swap date less shares already owned by CDF.
26.Any other matters that need to be specified:
1)We have based the offer price and number of shares swapped on the
ex-dividend prices and number of shares of CDF and China Life.
2)Terms and conditions of preferred shares:
a.Par value of NT$ 10, to be listed on TWSE
b.Non-convertible
c.Annual dividend yield: 3.55%
(Estimated 7yr-IRS rate on issue date 0.75%+2.80%)
d.Dividend will be paid in cash once a year
e.Perpetual with no redemption rights. CDF has the right to
call all or part of the preferred shares at the issue price
on the next day after 7 years from the issue date.
f.CDF has discretion over distribution of preferred share dividends.
CDF may not pay dividends in the following cases: 1.) insufficient earnings,
2.) payment results in capital adequacy ratio below regulatory
or competent authority requirements, and 3.) other valid considerations.
g.Non-cumulative
h.To be issued an issuance price of NT$ 10 on the swap date
i.All terms and conditions are subject to competent authority approval.