The Ministry of Finance on Friday surprised many with its lack of a decision on the auction of its 28 percent stake in Taiwan Business Bank (台灣企銀). The ministry invited potential bidders to submit proposals for the share sale, and was expected to announce the result as soon as the auction was closed later that day. But the ministry remained tight-lipped after bidders submitted their proposals, saying that it was still studying offers and couldn't make an immediate decision.
If the ministry thinks it needs more time to evaluate the case because the offers by potential bidders were lower than shares' floor price, and that any decision to sell its holdings based on such low offers would only invite strong criticism for selling state assets too cheaply, the ministry is justified in its actions. But if it regards the delay of a decision as simply a technical issue or a matter of procedure during the auction, it should think twice, because the delay has triggered speculation of under-the-table deals and created unwanted side effects.
Privatization of government assets, especially state-run banks, is always a sensitive issue. The market needs accurate information to make a judgment about the deal. As Taiwan Business Bank is currently experiencing a nationwide work stoppage as employees protest privatization plans -- similar to what happened when Chunghwa Telecom Co (中華電信) concluded a five-year privatization process last month -- investors hope both openness and transparency will prevail in the sale, and expect it to go through despite employee strikes. But the way the ministry dealt with the Friday auction -- maintaining silence on everything -- contributed nothing to market confidence, and added concerns about the government's commitment to its second-stage financial reform plans. Once again, openness and reform are intimately linked.
As it became clear that the ministry was being questioned thoroughly about its postponement, Minister of Finance Lin Chuan (林全) apparently wasted no time, holding a press conference on Saturday evening a few hours after flying back from a two-day APEC meeting of finance ministers on South Korea's Jeju Island. Lin confirmed that the highest price offered by one of the bidders was lower than expected, and added that the ministry will consult with a bidder and try to convince it to submit a new offer. Still, citing confidentiality, he did not reveal how many bidders had participated in the tender, who the ministry is going to consult with or what the ministry's asking price was.
Thus, the market is full of rumors. Some said that E.Sun Financial Holding Co (玉山金控) offered the highest price, at about NT$10 a share for the stake, but the lender was not a government-preferred buyer. Others said both Chinatrust Financial Holding Co (中信金控) and Cathay Financial Holding Co (國泰金控) were strongly encouraged by the government to participate in the bidding, but that they didn't even submit their tender proposals.
Some have argued that the ministry opened the bid at a time when the legislature is in recess because the ministry didn't want lawmakers to step in and politicize the privatization process. That strategy seems reasonable. What appears beyond the ministry's expectations, however, was that the union's action, said to be the first strike by bank employees in this country, has had an impact on the bidding prices.