Chang Hwa Commercial Bank (彰化銀行), the nation's sixth-largest bank by assets, yesterday delayed revealing the winning bidder of a global depositary receipt (GDR) issuance, amid market speculation that bids had fallen far short of the market price of the company's shares.
The company hopes to find a foreign investor to buy a controlling stake in the bank through the issuance.
"There is no new progress in the deal and we didn't discuss the issue in the [provisional] board meeting today," the bank's executive vice president Hsieh Chao-nan (
Bids from interested buyers are currently under evaluation by the deal arranger Credit Suisse First Boston Corp and thus no decision has been made as yet, he added.
Hsieh dismissed market speculation that the delay in announcing the winning bidder was because the bids handed in last Friday were too low. One news report said that the interested parties' bids were up to 75 percent less than the price of the bank's shares on the Taiwan Stock Exchange.
The lender's stock closed at NT$20.60 on Friday.
The result would come out at the shareholders meeting slated to take place in June, he said.
Despite Hsieh's remarks, the bank said in a statement to the Taiwan Stock Exchange later yesterday that discussion of the GDR issuance was included in the agenda for yesterday's board meeting.
Chang Hwa's shares plunged on the news yesterday, falling by NT$0.9, or 4.39 percent, to close at NT$19.60.
Market speculation on the bidding price was sparked by a report in the London-based Financial Times which, citing a source close to the deal, said on Monday that the offers were 50 percent or 75 percent less than the market price of the bank's shares.
Describing the reported low bids as a bargain-hunting strategy by foreign buyers, a market watcher said that Chang Hwa, with its 168 branches and a net book value of over NT$10 after deducting NPLs, deserved a higher price.
"It is not reasonable for foreign investors to gain a controlling stake without paying a premium," said Tess Wang (
The government is pushing to consolidate the overcrowded banking sector and plans to sell Chang Hwa's shares to foreign investors in two steps.
The first step is the GDR sale, with the bank offering 1.45 billion new shares, or around a 22 percent stake, to be auctioned to a single foreign investor. In the second stage, the Ministry of Finance will sell 1.12 billion shares it holds, or around a 17 percent stake, to the GDR holder. The winner would thereby obtain a controlling stake of nearly 40 percent of Chang Hwa's shares
The deal has drawn two interested buyers: Japan's Shinsei Bank Ltd and a consortium formed by US Lone Star Funds that includes the Carlyle Group Ltd and Dutch ING Groep NV.
The low-bid precedent set by Chang Hwa could have a negative impact on future share-sales of other state-run banks, including First Commercial Bank (第一銀行) and Hua Nan Commercial Bank (華南銀行), which plan to release fewer shares than Chang Hwa, said Chu Yu-chun (朱玉君), an analyst with SinoPac Securities Corp (建華證券).
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