Citigroup Inc was fired from arranging a US$700 million global share sale by First Financial Holding Co (
The sale of 1 billion shares was at risk of being scrapped yesterday after investors contacted by the world's biggest financial company sought a 30 percent discount to First Financial's local share price, a banker who asked not to be identified said yesterday. The company wanted to sell stock at a 10 percent discount, the banker said.
``During the process we dis-agreed with Citigroup on many things, including the price,'' First Financial's president Ray Dawn (董瑞彬) said in a telephone interview. ``We didn't think the response that Citigroup received [from investors] was fair to us. The sale remains on schedule with Deutsche Bank as the sole manager.''
First Financial, two-fifths owned by the government, is raising funds to bolster the balance sheet of its First Commercial Bank (第一銀行) unit, which posted a NT$26.4 billion (US$768 million) loss in the first nine months of last year as it wrote off bad loans from a 2001 recession.
Citigroup "obviously feel that their position on pricing was correct and their reputation was at risk," said David Chapman, who helps manage US$650 million at Towry Law Asia HK Ltd. "It'll be interesting to see if Deutsche Bank can get the deal done at the what must have been more favorable terms for the company."
Citigroup's sacking comes amid a decline in business globally for investment banks, which has seen them pare fees for arranging share sales after the worst slump in the number of initial public offerings worldwide since 1979.
Global share sales by companies in Asia excluding Japan and Australia this year are about half that during the same period of last year.
The US investment bank could have faced a pay check of about US$9 million for the First Financial sale, based on the average of fees paid last year.
Citigroup is ranked third among sellers of US-dollar denominated convertible bonds for Taiwan-based companies, trailing second-placed Lehman Brothers Holdings Inc and Morgan Stanley.
Citigroup has sold US$375 million of convertible bonds this year for Primax Electronics Ltd (致伸電子), Taishin Financial Holdings Co (台新金控), Sintek Photronic Corp (和鑫光電) and CTCI Corp (中鼎工程).
It owns about 10 percent of Fubon Financial Holding Co (