The China Development Indus-trial Bank (CDIB, 中華開發工銀) is moving ahead with its plan to acquire a stake in Grand Cathay Securities (大華證券) despite Grand Cathay's opposition to the plan and government concern that its merger announcement could have violated provisions of the Exchange Law.
"I don't think our plan will be affected by the Grand Cathay board's decision as we plan to secure the stake from a different source," a China Development executive said yesterday.
The executive made the remark in response to a decision which came out after an extraordinary board meeting of Grand Cathay late Monday that it won't welcome China Development's plan to acquire a large stake through a tender on the open market. The decision is seen putting a big obstacle in front of China Development's plan.
Last week, China Development announced its intention to acquire 200 million shares in Grand Cathay at a market price of NT$20 a share during April 11 to April 20.
However, the plan has yet to be approved by the regulatory Securities and Futures Commission (
"The decision was reached hastily, with only a few parties having knowledge of our plan before the announcement, thus resulting in misunderstanding.
"Nonetheless, we are time-pressed to reach our goal as we aim to stage the acquisition ahead of Grand Cathay's annual shareholders meeting," the executive said.
Nonetheless, local Chinese-language media reported yesterday that China Development's announcement to buy shares of Grand Cathay could have violated some provisions of the Securities Transaction Law, citing Finance Minister Yen Ching-chang (顏慶章).
The report quoted Yen as saying that under the current regulations, a company is not allowed to purchase shares of a target company for acquisition from the centralized stock market if it intends to acquire the target firm via public acquisition. However, China Development had started snapping up shares of Grand Cathay one week before the industrial bank made an official announcement of its plans on March 28. This has violated Provision 5 of acquisition regulations, the paper said.
While China Development has defended itself by saying that it currently holds a 5 percent to 6 percent stake in Grand Cathay, the paper indicated that Ministry of Finance found that the investment bank has purchased shares of the brokerage through its overseas affiliates and already boosted its stake in Grand Cathay to over 10 percent -- which the Securities and Futures Commission weren't being properly informed by China Development in prior to its merger announcement last week.
In this respect, Yen said he has asked the Securities and Futures Commission to conduct further investigation into the matter and will offer appropriate punishment to China Development should it have actually violated the law.
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