KGI Securities shares rise amid talk of acquisition

Shares of KGI Securities Co (中信證券) went limit-up amid market speculation that the securities firm may be acquired by the China Development Financial Holding Corp (中華開發金控) through a 1:1 share swap.

KGI Securities closed up 6.5 percent at NT$13.25 while China Development Financial ended up 2.5 percent at NT$15.7 on the Taiwan Stock Exchange.

China Development Finan-cial, the nation's 13th-largest financial holding company in terms of total assets, and KGI Securities, which enjoyed a 4.6 percent share of the domestic stock brokerage market last year, denied speculation about the possible acquisition, a Chinese-language newspaper reported yesterday.

"Neither company has confirmed the speculation, but investors see that a strong possibility for such a merger exists, given the Koos' family stake in China Development," George Lai, an analyst at SinoPac Securities Co (建華證券), said in an investment note yesterday. "The street view is that any such merger would favor KGI Securities, which was reflected in today's share price movement."

The Koo family, Taiwan's fourth-richest family according to Forbes magazine, took control of China Development in April after former KGI president Angelo Koo (辜仲瑩) defeated then chairwoman Diana Chen (陳敏薰) in a boardroom battle.

Unlike other Taiwanese securities firms, KGI Securities has sizeable overseas exposure. According to the Taiwan Ratings Corp (中華信評), about 15 percent of KGI's total network was invested in three overseas subsidiaries in Hong Kong, Korea and Thailand at the end of last year. Taiwan Ratings is an arm of Standard and Poor's ratings agency.

China Development Financial late last month sharply revised downward its earnings forecast for the year to a NT$4.8 billion loss from its original forecast of a NT$8.3 billion profit, it said in a statement to the Taiwan Stock Exchange late last month. The company blamed the change in forecast on provisions to cover possible losses on investments.