Citigroup and the Fubon Group of companies has fomed a strategic business partnership to become leaders in the large and rapidly growing financial services market in Taiwan while establishing a platform for expansion into other key Asian markets.
The partnership calls for Citigroup to invest 15 percent in all of Fubon's five financial services businesses, including Fubon Insurance, Fubon Securities and Fubon Commercial Bank, which are publicly-traded; and Fubon Life Assurance and Fubon Asset Management, which are privately-held.
Citigroup's investment will be made through the purchase of new equity interests representing 15 percent of the enlarge capital of each business.
With respect to the asset management and life insurance businesses, Citigroup will merge its current Taiwan businesses into Fubon Asset Management and Fubon Life Assurance, respectively.
After the merger and he investment by Citigroup, Citigroup's equity interest will represent 15 percent of the merged entities.
The proposed investment in Fubon's five businesses is estimated to be approximately Taiwan $23 billion ($750 million)
For the three public companies, the estimated price will be based on the market closing stock prices as of May 4th, 2000, subject to regulatory approvals, representing approximately Taiwan $20 billion ($650 million). After making its investments, Citigroup will be granted one Board seat on each of Fubon's five cmpanies.
In Taiwan, the Fubon Group will be Citigroup's partner in property and casualty insurance, life insurance, banking, securities and asset management. Fubon Insurance and Fubon Life Assurance will work closely with Travelers Insurance companies to identify new technologies and new products to deliver more value to customers in Taiwan.
In addition, Citibank will provide technology and training support to Fubon Commercial Bank to further strengthen its overall competitivensss in the marketplace. The partnership, however, has a scope and objectives that extend beyond Taiwan.
An important component of the partnership is the commitment of the partners to pursue regional expansion in the property and casualty and life insurance businesses in markets across Southeast Asia and China. The partners have agreed to structure equal partnerships in those markets as they expand across Asia.
"This partnership creates a venture positioned for leadership and growth in one of Asia's most attractive markets, linking our own local presence and global capabilities with Fubon's premier brand name, excellent businesses and talented and entreprenurial management teams," Sanford I. Weill, chairman and chief executive officer of Citigroup, said in a press statement.
Weill added that the Fubon Group is a financial services enterprise in Taiwan that, in terms of product scope, bears many similarities to that which Citigroup now creates in the global marketplace.
"This strategic joint venture will, among other things, provide Citigroup the opportunity to expand its insurance operations into Asia for the first time by joining forces with the number one property and casualty insurer and one of the fastest growing life insurers in Taiwan, add a strong middle market and retail commercial banking presence to our existing high-end banking operations and enable us to offer our clients a tremendous depth of knowledge and expertise in all aspects of the Taiwanese securities and asset management businesses," he added.
Fubon Group chairman Tsai Wan-Tsai said that the group shares Citigroup's vision of providing customers the convenience of one-stop shopping for all financial services.
"Citigroup's unparalleled global scope, prodcut expertise and strong local expertise make it an ideal partner. We will apply Citigroup's investment in Fubon to our expansion in Southeast Asia and China, including Hong Kong. We are very excited by the tremendous growth opportunities in insurance across Asia. Specifically, we are looking forward to leveraging Citibank's strong regional banking network to enter into life and property-casualty insurance businesses in Asia.
"Citigroup's significant investment in the Fubon Group will not only strengthen the Group's capital base for expansion in Asia, but will also assist the Fubon Group companies to raise our operations and technology to the best of world standards. This partnership will create a powerful platform from which to compete in Taiwan and other Asian insurance and financial services industries," Tsai added.
The financial institutions team at Salomon Smith Barney in Asia acted as strategic and financial advisor to the Tsai clan and the Fubon Group on this partnership. The transaction is subject to execution of definitive documentation and approval of regulatory authorities and is expected to close in the next few months.