Local home-appliance maker Tatung Co (大同) yesterday saw its share price drop by the daily limit after it on Tuesday announced plans for a NT$32.13 billion (US$1.02 billion), or 57.88 percent, cut in capital through the cancellation of 3.21 billion shares to strengthen its financial structure.
Shares ended at NT$6.89, the lowest since Feb. 8, when the stock traded at NT$6.20, Taiwan Stock Exchange data showed.
After the capital reduction, which is still pending shareholder approval at the annual general meeting on June 18, Tatung’s paid-in capital will drop to NT$23.38 billion, the Taipei-based company said in a stock exchange filing on Tuesday night.
Ming Ho (何明芳), head of the company’s public relations division, said yesterday that part of the reason for the capital reduction — the first in the company’s 90-year history — concerned its long-term investment losses in Chunghwa Picture Tubes Ltd (中華映管), the nation’s third-biggest LCD panel maker.
“We have to book about 20 percent of the investment losses we made in Chunghwa Picture under the equity method,” Ho said by telephone.
She declined to provide exact figures on the losses incurred at Chunghwa Picture, as Tatung has yet to release its financial results for last year.
The capital reduction is expected to reward shareholders with higher net worth per share, lifting the number to NT$12 from NT$6 per share, the company said.
Tatung posted a loss of NT$5.42 billion in the first nine months of last year, compared with a profit of NT$412 million in the same period in 2008, financial reports showed.
The company controls about 24 percent of Chunghwa Picture, while Compal Electronics Inc (仁寶電腦) holds about 18 percent after it bought 2.8 billion shares of the panel maker for approximately NT$7 billion in July.
A Citigroup estimate showed that Chunghwa Picture accounts for about 19 percent of Tatung’s total enterprise value and accounted for virtually all of the NT$6.2 billion investment-related losses Tatung booked in the first three quarters of last year.
Chunghwa Picture announced on April 8 that its board had approved a plan to cut capital by 60.59 percent through canceling 9.99 billion shares to help reduce its losses. That plan will be subject to approval at an annual shareholder meeting on May 20.
Ho said Tatung’s board on Tuesday also discussed and approved several proposals to raise new funds, which the company intends to use to repay loans, purchase raw materials and strengthen its working capital.
In separate filings, Tatung said it planned to sell as many as 1.2 billion new shares via a private placement deal. This would help the firm raise NT$8.4 billion at NT$7 per share.
In addition, the company said it planned to raise NT$12 billion by issuing 1.2 million new shares at NT$10 each and hoped to secure a syndicated loan of between NT$3 billion and NT$3.6 billion from local banks led by Taishin International Bank (台新銀行), the filings said.
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