Chang Hwa fails to decide on merger

Despite emotional objections from labor union members and a lengthy speech by a board member representing private-sector shareholders, Chang Hwa Commercial Bank's (彰化銀行) board meeting yesterday was abruptly called off without conclusion and delayed until Jan. 31.

The state-run bank was supposed to meet yesterday to decide on its favored share-swap ratio for a planned merger with Taishin Financial Holding Co (台新金控).

To everyone's surprise, Chinese Nationalist Party (KMT) Legislator Chiu Yi (邱毅) showed up at the meeting on behalf of Eric Chen (陳建志), one of two board members representing the private-sector shareholders.

"We demand that Taishin Financial representatives stay away from the meeting to avoid a conflict of interest," Chiu told the Taipei Times in a phone interview before the meeting.

"They would be in violation of the Corporate Law (公司法) if they insist on voting and force the board to pass the proposal," Chiu said.

Taishin Financial controls eight of the 15 seats on Chang Hwa's board after it acquired a 22.5 percent stake in the state bank in 2005. The Ministry of Finance has four seats.

During the meeting, an unspecified private-sector board member said the material provided by the merger's advisor Goldman Sachs was insufficient, Deputy Minister of Finance Liu Teng-cheng (劉燈城) said.

The board then decided to delay the meeting until Jan. 31, Liu said.

Asked whether Goldman Sachs had suggested a share-swap ratio as the Chinese-language Commercial Times had reported earlier yesterday, Liu declined to answer but said the newspaper's report that a ratio of 1:1.5 to 1:1.8 had been suggested was "totally groundless."

Though several board members queried Chiu's qualifications to attend the meeting, the Financial Supervisory Commission said he could legitimately serve as a board member as he had not violated any financial law.

The state-run lender later confirmed Chiu as a board director, replacing Ho Chuan Co's (和川股份公司) Chen. In a filing with the Taiwan Stock Exchange yesterday, Chang Hwa said Chiu would sit on the board beginning yesterday.

Chiu was sentenced to 14 months in prison last year for violent conduct during a protest in front of the Kaohsiung District Court following the 2004 presidential election. He was released in November as part of a government sentence-commutation policy commemorating the 20th anniversary of the end of 38 years of martial law.

Tsao Ping-kun (曹炳坤), chairman of Chang Hwa Bank's labor union, said in a telephone interview yesterday that the union would continue to boycott the deal if the ratio offered by Taishin remains at 1:1.3.

"It is a deal without any synergy that will impede the interests of shareholders and employees," Tsao said.

The union estimates the Taishin proposal would result in a loss of NT$560 million for the Treasury.

Taishin's proposal has sparked controversy because of its complex structure with 60 percent in common shares and 40 percent in preferred shares. According to Taishin's proposal, the preferred shares will be non-convertible for six years and would receive no dividends should the merged bank fail to turn a profit.

Chang Hwa Bank stock fell NT$0.1 to close at NT$17.75 yesterday, while Taishin Financial shed NT$0.1 to close at NT$13.10.