Sat, Sep 09, 2006 - Page 12 News List

Yuanta secures control of Fuhwa board

MERGER SCHEME Yuanta's move is part of its plan to merge the two financial firms which is being fiercely opposed by the holding company representing the KMT's stake

By Amber Chung  /  STAFF REPORTER

Yuanta Core Pacific Securities Co (元大京華證券), the nation's largest brokerage firm, yesterday secured a majority of board seats at Fuhwa Financial Holding Co (復華金控) as expected, in a step toward completing a drawn-out merger deal in the first quarter of next year.

During a provisional shareholders' meeting yesterday, Yuanta Core Pacific, Fuhwa Financial's largest shareholder, which controls a 45 percent stake along with its supporters, grabbed six out of nine board seats and two of three supervisor spots in the nation's eleventh-biggest financial group by assets.

Another major shareholder, Central Investment Holding Co (中央投資), which represented the Chinese Nationalist Party's (KMT) 22 percent stake, took two board seats, while the Bank of Taiwan (台灣銀行), which holds a 13 percent stake on behalf of the government, obtained one board seat and one supervisor spot.

A board meeting will be convened next Tuesday to select a chairman, according to Yuanta Core Pacific.

Central Investment, which opposes Yuanta Core Pacific's take-over attempt, said it will file a lawsuit to invalidate the selection result for board members and supervisors.

The tussle has delayed the proposed merger deal by one year, with Central Investment gunning against Yuanta Core Pacific's offer.

Yuanta Core Pacific has proposed swapping one of its shares for 1.5 to 1.7 Fuhwa Financial shares.

Central Investment wants Yuanta Core Pacific to propose a more "reasonable" share swap ratio, the company's president Steve Wong (汪海清) said on the sidelines of the meeting. However, he was tight-lipped about what ratio Central Investment would deem acceptable.

Fuhwa Financial's board is expected to review and discuss the merger deal later this year and decide on the share swap ratio, Fuhwa Securities Co (復華證券) President Lin Tien-fu (林添富) said.

The merger is expected to take effect in the first quarter of next year, while the actual integration of the firms could be completed by the middle of next year, he added.

"The projected merger will allow us to get an independent cash flow channel through Fuhwa Bank (復華銀行)," Yuanta Core Pacific Spokesman Lawrence Lee (李雅彬) said.

Under the current regulations, securities houses like Yuanta Core Pacific face tighter government rules regarding capitalization and investment than those commercial banks must follow, he said.

According to Yuanta Core Pacific's merger plan, the brokerage will first merge with Fuhwa Securities. The new brokerage entity will then cut its capital by at least NT$10 billion (US$304 million) and will return those proceeds to the parent, Fuhwa Financial.

Lee said that Fuhwa Financial may use the funds to strengthen Fuhwa Bank's capitalization and asset quality.

The proposed merger will have a positive impact on Fuhwa Bank's ratings, provided that Yuanta Core Pacific, which boasts strong capitalization, secures majority control of its parent group, Fitch Ratings said on Monday in a press release.

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