Tue, Oct 07, 2003 - Page 1 News List

Experts back Fubon over merger with TaipeiBank

By Joyce Huang  /  STAFF REPORTER

Market insiders yesterday spoke in support of Fubon Financial Holding Co (富邦金控), which has been accused of cutting an improper deal with the Taipei City Government when it outbid four competitors to merge with TaipeiBank (台北銀行) last year.

They also disagreed with City Councilor Lee Wen-ying (李文英), who accused the auction's manager, Goldman Sachs, of overcharging for its services. Goldman Sachs received NT$200 million from the NT$80 billion deal.

"Those were a lot of silly political accusations," Goldman Sachs' Hong Kong-based spokesperson Eddie Naylor said yesterday. "Fubon Financial went through very extensive auction processes, which we managed and were in line with international practices."

"The process of the groundbreaking transaction was sophisticated and transparent, and our fee charges were in line with market levels," Naylor said.

Josephine Juan (阮淑祥), a manager at Taiwan Ratings Corp (中華信評) -- the local arm of Standard & Poor's -- also praised the merger, saying Fubon was the best merger partner and offered the highest market price for TaipeiBank.

Citing a rating agency report, Juan said that both Fubon Commercial Bank (富邦銀行) and TaipeiBank, before the merger, performed very well with a low non-performing loan ratio, garnering a rating of "AA-" each last year.

After the merger that incorporated TaipeiBank, parent Fubon Financial still maintained a long-term outlook rating of "AA-," she said.

Unless investigators found any irregularities in the bidding process, the prices offered by bidders would never match the bank's book price, Juan added.

On Saturday, former TaipeiBank president Liao Cheng-ching (廖正井) argued that the bank, whose assets stood at NT654.3 billion before the merger, shouldn't have been sold to smaller rival Fubon Financial, whose stand-alone assets were NT$122 billion.

But Fubon Financial vice chairman Daniel Tsai (蔡明忠) yesterday argued that net assets, instead of combined assets, should be the benchmark to look at when making share-swap deals.

Before the merger, Fubon Financial's net assets stood at NT$101.2 billion, far greater than TaipeiBank's net assets of NT$45.6 billion, according to Tsai.

Endorsing Tsai's view, Chou Tien-chen (周添城), an economics professor at National Taiwan University, said that not all of a financial institution's assets could be counted as assets because some of them will be non-performing, and bank deposits should considered as liabilities rather than assets since the bank owes the money to its clients.

"When it comes to share-swap deals, net assets will truly reflect the value of companies across all sectors," Chou added.

Minister of Finance Lin Chuan (林全) yesterday told the legislature that the ministry was in no position to step into the merger deal's pricing as long as the boards of both private companies gave their approval.

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