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Chang Hwa Bank calls off GDR auction

Chang Hwa Commercial Bank (彰化銀行), the nation's sixth-largest bank by assets, yesterday formally announced that it would halt its drawn-out auction for its global depositary receipt (GDR) issuance of 1.4 billion shares, citing unbridgeable differences between the bank and the interested bidders.

"There remains a discrepancy in the terms of the deal between both sides, and therefore we decided to suspend the deal," the bank said in an announcement posted on the Market Observation Post System of the Taiwan Stock Exchange Corp yesterday.

The bank did not disclose the names of the interested bidders or the content of the terms in the statement, citing confidentiality.

Chang Hwa would turn to other measures like raising domestic capital or issuing bonds to improve its finance structure and lift its capital adequacy ratio, the statement read.

Capital adequacy is a measure of a bank's financial strength, usually expressed as the ratio of its capital to its assets.

The lender originally hoped to find an overseas investor to buy a stake of nearly 40 percent in the bank through the GDR issuance.

The deal has attracted two interested buyers: one is Japan's Shinsei Bank Ltd and the other is a consortium formed by US Lone Star Funds that includes the Carlyle Group Ltd and Dutch ING Groep NV.

The bank reportedly preferred a sale price of NT$16 to NT$17 per share, while the most likely bid winner, Shinsei Bank, offered NT$12 to NT$13 per share, which bogged down the deal.

The Ministry of Finance said yesterday that the government still hopes to get rid of its stake in the bank by the year's end, the Central News Agency reported.

The government currently controls a 23 percent stake in Chang Hwa.

The report said Minister of Finance Lin Chuan (林全) will make public the alternative plans next week, citing Liu Teng-cheng (劉燈城), director general of the ministry's National Treasury Agency.

The alternative approaches may include share sales, putting the assets up for auction, mergers or a recapitalization scheme, according to the regulations of the Act of Privatization of Government-Owned Enterprises (公營事業移轉民營條例), Liu said.
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