Shareholders of two of the firms in a consortium buying U.S. insurer AIG's Taiwan unit approved the $2.16 billion bid on Wednesday, setting the scene for what is expected to be a tough battle with regulators.
Ruentex Development Co and Pou Chen shareholders passed the deal, with those of Ruentex set to approve the bid at a separate meeting later in the day. The three make up the buyer group called Ruen Chen Investment.
The deal for the loss-making Nan Shan, Taiwan's No.3 life insurer, is AIG's second attempt at a sale in an over year-long push-me-pull-you with regulators acutely sensitive to the fate of Nan Shan's 4 million policyholders, or one-sixth of Taiwan's population.
The first sale of Nan Shan was blocked last year after the regulator decided that the-then buyer group, battery maker China Strategic and investment firm Primus, did not meet the five conditions it had set out.
The five conditions set out by the regulator, the Financial Supervisory Commission (FSC), are: fund-raising ability for future operations; a long-term commitment to run Nan Shan; experience in running an insurance business; taking care of employees and policy holders and funding sources that meet Taiwan regulations.
"We are confident of meeting the five conditions," Liu Chung-hsien, chairman of Ruentex Development, told Reuters on the sidelines of the shareholder meeting on Wednesday.
But some analysts say Ruen Chen is unlikely to meet all of the conditions, while others note that financing the deal is shaping up to be a big issue.
The FSC, has asked the group to give more details on fund-raising ability and management, and wants it to reduce the loans it is taking out, a source told Reuters on Tuesday.
The request means that Ruen Chen may have to cut its loans from banks in Taiwan to less than 50 percent of the purchase price from the up to 60 percent now being arranged, said an official of one of the banks involved in the lending.
"The biggest concern from regulators' point of view is that Ruen Chen does not have pockets deep enough to acquire Nan Shan," said a manager at a local fund firm, asking not to be identified because of the sensitivity of the issue.
"The funding ability is very critical given Taiwan's insurance companies will have to raise funds in the future."
He added that as an investor, his firm does not like shares in the bidder group companies because they do not have "a good enough game plan to persuade investors the Nan Shan deal will be positive."
The regulator's request for more information also recalls the original failed deal, when the buyers complained about constant requests for more details from the regulator, and the regulator complained that the requests were not being answered.
Ruentex Development's Liu said his firm could not respond to the regulator's comments since it had not received any such requirements from regulators.
The buyers also face disgruntled labour unions at Nan Shan who are seeking T$15 billion to T$16 billion ($510 million-$540 million) in pension money for the unit's over 30,000 sales agents in a long-running dispute over benefits.
That could cost Ruen Chen as much as an extra 25 percent of the purchase price.