Hong Kong investor Peter Kwok (郭炎) could become the largest shareholder of Chinatrust Financial Holding Co (中信金控) and ownership of Taiwan’s largest credit-card issuer could shift from the Koo family to the Kwok group if an equity offering currently under consideration were allowed to go through, a new report dated May 20 warns.
The report, a copy of which was obtained by the Taipei Times earlier this week, was prepared by the office of Democratic Progressive Party Legislator Pan Meng-an (潘孟安) and raises serious questions about Kwok’s financial capabilities, his political allegiance and the origin of some of the money that would be used to finance his investment.
At present, the shareholder composition at Chinatrust is chairman Jeffrey Koo (辜濂松) at 7.28 percent (Koo family members hold an aggregate of about 20 percent); Morgan Stanley and other foreign companies at 43 percent; Cathay Life Insurance (國泰人壽), Far Glory Life Insurance Co (遠雄人壽), the Bureau of Labor Insurance and Fubon Life Insurance Co (富邦人壽) at between 1.04 percent and 1.42 percent each, the report says.
Following delays in capital collection, the board of directors at Chinatrust decided on May 17 to issue 2.5 billion shares through private placement at NT$16.45 per share, with a total value of NT$41.125 billion (US$1.28 billion), which will be submitted during a shareholders meeting scheduled for June 30.
This is the largest seasoned offering in the nation’s history.
According to the provisions of Article 16 in the Financial Holding Company Act (金融控股公司法), the report says, any holder of more than 10 percent of shares must be assessed for major shareholder eligibility.
AVOIDING ASSESSMENT
Kwok is expected to invest about NT$21 billion, for a 9.9 percent stake in Chinatrust, meaning that a shareholder eligibility assessment would not be necessary.
The share allocation after the private placement would be Koo at 5.75 percent (17.8 percent for the Koo family); USI (Kwok and Ed Rogers at 14 percent together); Hong Kong-listed China Strategic Holdings Ltd (中策集團) or other private placement shareholders at 6 percent and Mitsui Sumitomo Financial Group Inc of Japan at about 1 percent, the report says.
The number of shares issued in the seasoned offering accounts for more than 21 percent of the equity. If it passed, Kwok, including his shares in USI, would become the largest shareholder of Chinatrust and the combined shareholding between Kwok, China Strategic and other private placement shareholders would overtake that of the Koo family.
In addition, Chinatrust agreed in November last year to sell about 10 percent of its shares to China Strategic in exchange for 30 percent of shares in Nan Shan Life Insurance Co (南山人壽), a subsidiary of American International Group Inc.
DILUTION
If the transaction succeeds through the acquisition of Nan Shan by Primus Financial Holdings Ltd (博智金融) and China Strategic Holdings — a contentious deal that is still being evaluated by the Ministry of Economic Affairs (MOEA) and the Financial Supervisory Commission (FSC) — it would further dilute the shareholding of the Koo family, the report says.
Born in 1949, Kwok is currently president of Hong Kong-listed USI Partners. He once headed China International Trust and Investment Corp (CITIC, 中國中信), a Chinese state-owned investment company, and was a member of the Chinese People’s Political Consultative Conference (CPPCC) for three consecutive terms. After resigning as a CPPCC member last year, he began making plans to invest in Taiwan.
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