China Development shares firm after chairman quits

Shares of China Development Financial Holding Corp (中華開發金控) were unchanged yesterday on the Taiwan Stock Exchange, despite the unexpected resignation of its chairman Chen Mu-tsai (陳木在) on Monday night.

In an unexpected move, the Ministry of Finance named Mega Financial Holding Co (兆豐金控) president Lin Tzong-yeong (林宗勇) to replace Chen as chairman of China Development Financial, the nation's sixth-biggest financial services group by market value.

State-controlled Mega Financial is the nation's second-largest financial group.

The ministry, the largest shareholder in the company, announced the appointment in a statement on its Web site late on Monday.

But market observers speculated that Chen -- who had been appointed by the government -- was forced to quit due to his ambiguous role in a bid to acquire Taiwan International Securities Corp (金鼎證券).

Local media reports had said that China Development Financial's proposed acquisition of Taiwan International Securities would benefit certain shareholders over others -- something Chen should have reported to the ministry.

Chen also sits on the board of China Development Industrial Bank & Partners Investment Holding Corp (開發國際), which is 28.7 percent-owned by China Development Financial.

The affiliate sold its 2.62 percent stake in Taiwan International Securities to its parent financial holding company during an 11-day hostile takeover bid between Feb. 19 and March 1.

Chen did not report the sale to the ministry, citing rules that exempt short-term investments from the requirement.

In response to its chairman's departure, China Development issued an e-mailed statement on Monday night, saying the ministry hadn't given the board and major shareholders prior notice, and that it would try to negotiate with the ministry to protect the interests of its nearly 600,000 shareholders.

It also acknowledged Chen's contribution and rejected recent media criticism over the company's bid to acquire Taiwan International Securities.

China Development said on March 1 that it had increased its stake in Taiwan International to 32.1 percent.

Taiwan International completed a merger with two smaller rivals -- First Securities Co (第一證券) and Far Eastern Securities Co (遠東證券) -- on Feb. 27.

China Development shares were steady yesterday at NT$11.75, while those of Mega Financial dropped 0.9 percent to NT$22.95 on the Taiwan Stock Exchange.

Shares of Taiwan International Securities were up 1.6 percent at NT$12.7.