Temasek's bid boosts Chang Hwa

State-run Chang Hwa Commercial Bank's (彰銀) shares yesterday nudged up by 1.06 percent to close at NT$19.0 on the Taiwan Stock Exchange, after Singapore-based Temasek Holdings reaffirmed its intention to buy the bank's stakes last week.

To secure the support of Chang Hwa's current management, Taishin Financial Holding Co (台新金控), which became the bank's largest shareholder after winning the tender for a 22-percent stake last month, said yesterday that it would support the bank's head in retaining his post.

"We hope Chairman Chang Po-shin (張伯欣) will continue his chairmanship in the future," Taishin Financial's chairman Thomas Wu (吳東亮) said on the sidelines of a bilateral contract signing ceremony yesterday.

Chang has not agreed to the proposal yet, Wu said.

Taishin Financial last month outbid six competitors with an offer of NT$36.5 billion, or NT$26.12 per share, to buy 1.4 billion new preferred shares sold by Chang Hwa, Taiwan's sixth largest lender by assets, with a floor price of NT$17.89 per share.

The move is expected to make Taishin Financial the nation's second largest financial holding group by assets, up from eighth place, after formally taking over the bank in the next three years.

Nevertheless, Singapore's government-owned Temasek Holdings Ltd, previously the most likely tender winner, reportedly offered in a letter to Chang Hwa's board members last week to buy the bank's common shares and the government's 17.5-percent stake for NT$21.5 per share, leaving Taishin Financial's triumph uncertain.

"We did receive the letter and have written back to Temasek," Chang said yesterday. He however declined to elaborate on the content of the feedback, citing confidentiality.

Temasek's efforts appear to have a slim chance of success, as the Ministry of Finance is unlikely to go back on its promise that the bid winner would be granted preference over the purchase of the government's stake in the bank next year.

"The ministry will never go back on its promises," said Liu Teng-cheng (劉燈城), director-general of the ministry's National Treasury Agency, who was present at the ceremony on behalf of Finance Minister Lin Chuan (林全).

Since the game rules are clear and firm, Temasek can only succeed through a tender offer to buy private shareholders' stakes in the open market, which is expected to boost Chang Hwa's share price, Chu Yu-chun (朱玉君), a finance sector analyst with SinoPac Securities Corp (建華證券), said in a report released yesterday.

Chu recommended buying Chang Hwa stocks with a target price of NT$23.5 per share.

"The higher the price expectations, the more expensive Taishin's acquisition is likely to be," Jesse Wang (王嘉樞), head of research with BNP Paribas Securities Taiwan Co, said in a report released yesterday.

Shares of Taishin Financial closed up 1.75 percent at NT$23.2 on the local bourse yesterday.