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Three-way merger close to collapse

"The government representatives on the board haven't agreed on the stock-swap ratio. If differences remain too wide, the three-way merger will fall through."

Lin Chuan, minister of finance

China Development Financial Holding Corp (中華開發金控) should seek alternatives within a week as a proposed three-way merger appears on the brink of collapse, Minister of Finance Lin Chuan (林全) said yesterday.

"I think we should end the month-long dispute," Lin said at a press conference after meeting with the government-appointed directors of China Development earlier yesterday in a bid to resolve the differences between the board members.

Seven government-appointed directors sit on China Development's 21-member board, including the financial holding company's chairman Chen Mu-tsai (陳木在).

To end the disputes, Lin said that Chen has agreed to assign independent board director Cyrus Chu (朱敬一), a research fellow at Academia Sinica, to negotiate with board directors to come up with other options in the next seven days, Lin said.

"The three-way merger should not be the only case that China Development studies. There should be other ways. China Development's future development should not come to an end simply because of this case," he said.

China Development planned to merge its brokerage unit, Grand Cathay Securities Co (大華證券), with KGI Securities Co (中信證券) and President Securities Corp (統一證券) to create the nation's biggest brokerage.

KGI Securities shareholders would reportedly get 1.468 shares of China Development for every share they hold, while President Securities shareholders would get 1.778 shares of China Development and NT$9.6 cash for every share they hold.

But on March 23, China Development postponed the proposed acquisitions after one of its board members, International Commercial Bank of China (ICBC, 中國商銀) general manager Mckinney Tsai (蔡友才), rejected the takeover plan.

Tsai stalled the plan, saying that the planned price of NT$24 a share to acquire President Securities was too high.

Mega Financial Holding Co (兆豐金控), the parent company of ICBC, had also expressed interested in acquiring President Securities, with an offer of NT$18.5 per share. But the Mega Financial deal failed as the securities brokerage demanded NT$24 per share.

``The government representatives on the board haven't agreed on the stock-swap ratio. If differences remain too wide, the three-way merger will fall through," Lin said.

The board would need to pass the merger plan by end of this month to get it approved at the annual shareholder's meeting on June 10.
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