The Ministry of Finance yesterday called on shareholders of Chang Hwa Commercial Bank (CHB, 彰化銀行) to support its efforts to win majority control of independent director’s seats in the former state-run lender so it can thwart Taishin Financial Holding Co’s (台新金控) acquisition bid.
CHB’s nine-seat board is due to elect new members on Dec. 8.
“The ministry is willing to negotiate, if Taishin Financial approaches the matter with sincerity and puts forth solutions acceptable to both sides,” Vice Minister of Finance Wu Tang-chieh (吳當傑) told a news conference.
FACEOFF
The ministry and Taishin Financial, the two largest CHB shareholders — with stakes of 20 percent and 22.5 percent respectively — remain in conflict over how to divide the board seats, Wu said.
That leaves the two sides no choice other than courting shareholders through authorization letters.
The tension has recurred since 2005, when Taishin Financial became the largest CHB shareholder, with a view to acquiring the lender and a government promise to secure majority control of the boardroom.
Wu challenged Taishin Financial to sign a statement whereupon the bank-focused conglomerate would pledge not to buy authorization letters in violation of securities rules, but rather would uphold the principles of fairness and pursue harmony.
TWO OUT OF THREE
The ministry insists on winning two of the three independent seats, as they have the power to overturn board proposals.
Taishin Financial should quit effort to acquire CHB with the intent of watering down government interest in the lender, Wu said, adding that the public would not allow that.
Taishin Financial aims to win an outright majority of seats — directors and independent directors — this time, allowing it substantial control of CHB, rather than share management rights with executives appointed by the government.
Currently, Taishin Financial and the finance ministry hold five and four board seats respectively, with Taishin naming the lender’s chairman and the ministry choosing its president.
“The ministry is determined to dominate seats of independent directors, while willingly and sincerely pursuing harmony,” Wu said.
Securities authorities have rallied behind the ministry, with Taiwan Depository and Clearing Corp (集保) to set up a task force to crack down on purchases of authorization letters, Wu said.
Foreign custodian banks also have agreed to convey the ministry’s wishes for at least two independent director’s seats, he added.
CHECKS, BALANCES
CHB can better boost its assets, net worth and profitability if the ministry can effectively exercise checks and balances, Wu said.
State-run financial service providers fare better in terms of profitability than Taishin Financial.
Taishin Financial issued a statement last night saying that it has complied with all existing regulations in dealing with CHB board re-elections.
The conglomerate urged the ministry to be reasonable, adding that government representatives tried three times to obtain a list of CHB shareholders, in what Taishin termed a violation of confidentiality.
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