Three-way merger sputters

A merger proposal initiated by China Development Financial Holding Corp (中華開發金控) nearly a month ago appeared to fail yesterday after Minister of Finance Lin Chuan (林全) said differences between the firm's government-appointed and private board directors were unbridgeable.

"There remains a certain gap [regarding the share-swap ratio among board directors] after independent board director Cyrus Chu's (朱敬一) efforts to coordinate failed last Saturday," Lin told a late-night press conference.

"We don't maintain any expectations on the deal any more," Lin said.

On March 23, China Development, the nation's fifth-largest financial services company by market value, postponed a plan 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) after one of its board members rejected the takeover plan. The move had been proposed in the hope of creating the nation's biggest brokerage.

Since the three-way deal looks unlikely to go forward, Lin said there was no need to wait for the board to resolve its disagreements by April 21.

The ministry on Thursday assigned Chu, a research fellow at Academia Sinica, to coordinate talks between the two groups of directors. Chu was tasked with reaching an agreement within one week.

In response to Lin's remark, China Development said last night that it would respect the fact that government-appointed directors did not agree with their proposal.

"We will continue to think about the best business model in the hopes of creating the biggest added value for shareholders in the future," Joyce Chen (陳昭如), China Development's executive vice president of human resources and corporate affairs, said in a phone interview.

Chen, however, declined to comment on whether the financial holding firm would consider alternatives to revive the three-way merger deal, or turn efforts toward a merger -- between KGI Securities and President Securities, or between China Development and KGI Securities -- or simply get rid of Grand Cathay Securities.

China Development originally planned to buy President Securities through a 40 percent cash and 60 percent stock deal, offering NT$24 per share and a swap ratio of one share of President Securities for 1.778 shares of China Development. The swap ratio offered for KGI Securities was one share for 1.468 shares of China Development.