Wed, Mar 01, 2006 - Page 12 News List

Taiwan International halts merger

WALKING AWAY The firm's sudden decision to drop a deal to merge with Far East Securities is seen as an attempt to head off a hostile takeover by a larger rival

By Amber Chung  /  STAFF REPORTER

Taiwan International Securities Corp's (金鼎證券) plan to merge with two other companies collapsed after the brokerage announced unilaterally on Monday that it would halt its acquisition of one of the firms.

The brokerage's sudden and controversial announcement was seen as a move to counter a hostile takeover attempt by bigger rival China Development Financial Holding Co (中華開發金控).

"Our board decided on Feb. 24 to cease the merger with Far East Securities (遠東證券) ? the written notice ... arrived at Far East on Feb. 26, before the deal took effect on Feb. 27 ? the merger therefore did not take effect," Taiwan International said in a filing to the Taiwan Stock Exchange yesterday.

A move by Far East's shareholders to transfer ownership of shares to another party makes it incapable of fulfilling a promise to support future board candidates nominated by Taiwan International, violating the merger agreement, the brokerage said.

The decision to halt the merger was legitimate and legal, because the merger contract -- which had been approved by the shareholders -- entitled the board to pull out of the agreement if certain deal-breaking conditions emerged, Taiwan International said.

The company's merger with First Securities Co (第一證券) would proceed, the firm added.

Taiwan International made the explanation after the Financial Supervisory Commission said the brokerage had not gained its approval to call off the merger.

The regulator said it will closely monitor any possible infringement of shareholders' rights.

The financial watchdog will summon Taiwan International to elaborate on the decision today.

In late August last year, Taiwan International began to push for a merger with three smaller rivals to counter what it said was a hostile takeover bid by China Development Financial, the nation's 13th largest financial group.

China Development Financial undermined the company's efforts by acquiring significant shareholdings in Global Securities Finance Corp (環華證金) and Far East -- two of Taiwan International's targets -- forcing Taiwan International to scale back its plans.

China Development Financial, which owns 36.44 percent of Taiwan International, slammed the decision to stop the deal in a statement released late on Monday.

As a major shareholder, China Development Financial may demand that Taiwan

International's board take responsibility for any damage to shareholders, it

said.

China Development Financial is to wrap up its tender offer for Taiwan

International this afternoon, hoping to buy as many as 133 million shares at

NT$14 apiece for about NT$1.86 billion.

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