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China Development Financial Holdings Commences Tender Offer for KGI Securities Co. Ltd.

      2012-04-06

China Development Financial Holdings (TWSE: 2883, hereinafter, 'CDFH' or the 'Company') announced today the commencement of a tender offer for shares of KGI Securities Co. Ltd. (Taiwan OTC: 6008, hereinafter, 'KGI Securities' or the 'Target') for NT$ 16.71 per share (NT$ 5.5 in cash and the remaining via swap with its shares, with the ratio estimated at one KGI share for 1.2 CDFH share) . The decision is based on the recognition that the transaction will reinforce the securities business of CDFH and enhance earnings generation capacity promptly, thereby delivering value to shareholders.
 
The commencement of the tender offer was resolved at the Company's meeting of the Board of Directors held today, April 5th, 2012, and is conditioned on the minimum tender of at least 1.638 bn shares (or 50.1%) of the outstanding shares of KGI Securities as well as the receipt of applicable regulatory clearances and other customary conditions.
 
The tender offer price is determined comprehensively considering KPMG's valuation report, the average of the Target's closing price of the last 20 trading days (NT$12.59 per share) and KGI Securities' adjusted book value (as of December 31, 2011, deducting goodwill coupled with M&A) of NT$11.99 per share.
 
Upon the completion of the tender offer, CDFH will not only greatly improve its earnings quality and stability, but will continue to an even greater extent than before to enhance the securities' core competence, to combine the two entities' complementary strengths, and to build on resources to entrench the business' leading position.
 
As of December 31, 2011, the group's capital ratios remained very strong at 225.81%, 32.66% and 444% for the financial holding company, the bank, and the securities respectively. To proactively reallocate its capital, CDFH plans to conduct a capital reduction of NT$16 bn for its 100%-owned subsidiary, China Development Industrial Bank, which will maintain a strong financial position with capital adequacy ratio of 21.17% post the aforementioned capital reduction.
 
Following the completion of the tender offer, CDFH intends to implement a second-step merger pursuant to which all remaining shares of KGI Securities not tendered in the offer will go through a series of procedures including share exchange (at a price not better than that of the tender offer), making KGI Securities a wholly owned subsidiary within the CDFH Group. The two securities firms will merge by year-end 2013.
About the KGI Group:
 
KGI Securities Co. Ltd., the second largest brokerage firm in Taiwan, is a multi-faceted, pan-Asian financial services group that thrives on providing the highest standards of service to its clients. With its commitment to professionalism, stability and high quality service and to its core advantage of innovation, KGI Securities has won the trust of clients and is also the first financial service institution to enter the list of Taiwan's 'Top 20 Global Brand Value Survey', a 2011 survey supervised by the Bureau of Foreign Trade, Ministry of Economic Affairs, organized b the Taiwan External Trade Development Council (TAITRA).
 
The said transaction will not only reinforce the securities business of CDFH and enhance CDFH's overseas recognition, but will also allow KGI Securities to leverage on CDFH's resources as one of Asia's largest investment institutions and its extensive network that covers diverse set of industries. Together, the combined entity will be better able to capitalize on investment opportunities as they arise, rack up stronger profits than peers, as well as to strengthen its franchise in the region and to fortify its position as a leading Asian bank.

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