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Brokerage to merge with two rivals

"Our next task is to talk with Global Securities Finance Corp for a possible takeover. It's uncertain now but we believe there is still room for negotiation."

Fred Chang, executive vice president of Taiwan International

Taiwan International Securities Corp (金鼎證券), a Taipei-based brokerage, yesterday failed to complete a planned four-in-one merger, instead announcing a merger with two smaller rivals through a full share-swap, a company executive said yesterday at a press briefing.

The merger, pending regulatory approval, will boost the initial capital of Taiwan International, the surviving entity, by one-third to NT$10.86 billion (US$323.57 million) from the original NT$8.2 billion after it acquires First Securities Co (第一證券) and Far East Securities (遠東證券), said Fred Chang (張慶隆), executive vice president of Taiwan International.

In separate board meetings yesterday afternoon, the three companies agreed on the merger deal, with a share-swap ratio of one share of First Securities for one Taiwan International share, and one share of Far East Securities for 0.75 shares of Taiwan International, Chang said during a press briefing.

The companies will announce the merger date after obtaining the government's approval, he added.

"Our next task is to talk with Global Securities Finance Corp (環華證金) for a possible takeover. It's uncertain now but we believe there is still room for negotiation," Chang said.

In late August, Taiwan International began to push for a merger with the three smaller rivals to counter what it termed was a "malicious" acquisition by China Development Financial Holding Corp (中華開發金控).

China Development, the nation's 13th largest financial group, as of Monday had a 32.74 percent stake in Taiwan International, up from 28.7 percent on Nov. 11.

However, the four-way merger fell apart after the board of Global Securities yesterday morning cast a dissenting vote on concerns that alleged unauthorized trading by Taiwan International Futures Corp (金鼎期貨) would affect its shareholders' rights and interests.

Taiwan International Futures, wholly owned by Taiwan International Securities, was ordered by financial regulators last month to suspend business for six months after an employee defrauded clients of more than NT$2 billion through unauthorized trading.

In a statement filed with the Taiwan Stock Exchange yesterday, Global Securities said that it would evaluate the impact and potential losses the deal could create before recalculating a possible share-swap ratio with Taiwan International Securities.

To demonstrate the company's sincerity, Chang said Taiwan International set aside a reserve fund to subsidize the merged entities' possible losses arising from the illegal trading.

He refused to disclose the fund's size, although a Chinese-language newspaper report put its value at NT$460 million.

When asked whether there was any truth to a media report that company was in merger talks with Shin Kong Financial Holding Co (新光金控), the nation's seventh-largest financial services provider, Chang declined to comment.

In separate statements made to the Taiwan Stock Exchange yesterday, the two institutions denied the report.
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