The Financial Supervisory Commission yesterday approved China Development Financial Holding Corp’s (CDFHC, 中華開發金控) NT$30.8 billion (US$1.02 billion) plan to acquire a 25.33 percent stake in Taipei-based China Life Insurance Co (中國人壽).

However, the commission said that China Life Insurance would be required to liquidate its 3.76 percent stake in CDFHC according to the terms of the Financial Holding Company Act (金融控股公司法), which prohibits a subsidiary from holding shares in its parent company.

The insurer has to submit a plan on how it would dispose of its stake in CDFHC, the commission said, noting that the company has not ruled out selling the shares to employees.

CDFHC may begin purchasing China Life Insurance shares on the open market as soon as today, with a time limit of three months to complete the acquisition.

The acquisition is expected to boost CDFHC’s total stake in the insurer to 34.96 percent.

China Life Insurance shares yesterday gained 1.9 percent to close at NT$32.20 in Taipei trading, while CDFHC shares rose 0.66 percent to NT$9.19.

Upon the completion of the deal, CDFHC would be among eight out of the 15 domestic holding companies that have a life insurance arm.

CDFHC last month announced plans to purchase China Life Insurance shares at NT$35 per share.

CDFHC issued a statement reminding China Life Insurance shareholders wishing to participate in the tender offer that the ex-rights and ex-dividend reference date for the insurer is Sept. 20, with the book closure date set for Sept. 15.

In consideration of a NT$0.8 cash dividend and NT$0.9 stock dividend per share approved by China Life Insurance’s board last month, if the tender offer settlement day is later than the book closure date, the adjusted tender offer price would be NT$31.38 after deducting the dividends from the tender offer consideration, it said.