Hong Kong investor Peter Kwok (郭炎) could become the largest shareholder of Chinatrust Financial Holding Co (中信金控) and ownership of Taiwan’s largest credit-card issuer could shift from the Koo family to the Kwok group if an equity offering currently under consideration were allowed to go through, a new report dated May 20 warns.
The report, a copy of which was obtained by the Taipei Times earlier this week, was prepared by the office of Democratic Progressive Party Legislator Pan Meng-an (潘孟安) and raises serious questions about Kwok’s financial capabilities, his political allegiance and the origin of some of the money that would be used to finance his investment.
At present, the shareholder composition at Chinatrust is chairman Jeffrey Koo (辜濂松) at 7.28 percent (Koo family members hold an aggregate of about 20 percent); Morgan Stanley and other foreign companies at 43 percent; Cathay Life Insurance (國泰人壽), Far Glory Life Insurance Co (遠雄人壽), the Bureau of Labor Insurance and Fubon Life Insurance Co (富邦人壽) at between 1.04 percent and 1.42 percent each, the report says.
Following delays in capital collection, the board of directors at Chinatrust decided on May 17 to issue 2.5 billion shares through private placement at NT$16.45 per share, with a total value of NT$41.125 billion (US$1.28 billion), which will be submitted during a shareholders meeting scheduled for June 30.
This is the largest seasoned offering in the nation’s history.
According to the provisions of Article 16 in the Financial Holding Company Act (金融控股公司法), the report says, any holder of more than 10 percent of shares must be assessed for major shareholder eligibility.
AVOIDING ASSESSMENT
Kwok is expected to invest about NT$21 billion, for a 9.9 percent stake in Chinatrust, meaning that a shareholder eligibility assessment would not be necessary.
The share allocation after the private placement would be Koo at 5.75 percent (17.8 percent for the Koo family); USI (Kwok and Ed Rogers at 14 percent together); Hong Kong-listed China Strategic Holdings Ltd (中策集團) or other private placement shareholders at 6 percent and Mitsui Sumitomo Financial Group Inc of Japan at about 1 percent, the report says.
The number of shares issued in the seasoned offering accounts for more than 21 percent of the equity. If it passed, Kwok, including his shares in USI, would become the largest shareholder of Chinatrust and the combined shareholding between Kwok, China Strategic and other private placement shareholders would overtake that of the Koo family.
In addition, Chinatrust agreed in November last year to sell about 10 percent of its shares to China Strategic in exchange for 30 percent of shares in Nan Shan Life Insurance Co (南山人壽), a subsidiary of American International Group Inc.
DILUTION
If the transaction succeeds through the acquisition of Nan Shan by Primus Financial Holdings Ltd (博智金融) and China Strategic Holdings — a contentious deal that is still being evaluated by the Ministry of Economic Affairs (MOEA) and the Financial Supervisory Commission (FSC) — it would further dilute the shareholding of the Koo family, the report says.
Born in 1949, Kwok is currently president of Hong Kong-listed USI Partners. He once headed China International Trust and Investment Corp (CITIC, 中國中信), a Chinese state-owned investment company, and was a member of the Chinese People’s Political Consultative Conference (CPPCC) for three consecutive terms. After resigning as a CPPCC member last year, he began making plans to invest in Taiwan.
Kwok met then-incoming Premier Wu Den-yih (吳敦義) when Wu visited Hong Kong in September last year.
CCP CONNECTIONS
Kwok is highly trusted by former CITIC president and Chinese princeling Wang Jun (王軍), the son of former Chinese vice president and one of the “eight immortals of the Chinese Communist Party” Wang Zhen (王震), the report says, adding that information from Beijing points to Kwok being responsible for Wang Jun’s personal foreign investments.
Wang Jun has been linked to everything from illegal arms shipments to illegal campaign donations in the US.
CITIC was founded by underground CCP member Rong Yiren (榮毅仁) in 1979 and Wang Jun acted as its president from 1995 through 2007, the report says. Its current president is Kong Dan (孔丹), the son of Kong Yuan (孔原), who headed the Central Investigation Department, which in 1983 became the Ministry of State Security.
“Behind Kwok is a conglomerate of China’s Crown Prince Party, National Security units and large political and commercial entities, with Peter Kwok being the control trader as the face of this conglomerate,” the report says, adding that he “is known for buying losing businesses at low prices and resells them to China’s state-owned enterprises at high prices for a huge profit.”
A number of legislators believe Kwok does not have the financial capabilities to make such an offering, adding that he has “suspicious motives” and is suspected of being funded by Beijing.
LOCAL HELP
Of the NT$21 billion that Kwok is expected to invest in Chinatrust, NT$12 billion will be jointly financed by Cathay United Bank (國泰世華銀行), Chang Hwa Bank (彰化銀行) and others as acquisition financing, the report says. In other words, Kwok would be “borrowing money from Taiwanese financial institutions to buy a Taiwanese financial institution.”
In its impact assessment, the report writes that the offering would result in Chinatrust and its large assets coming under the control of Chinese “vultures,” interference by said “vultures” in companies dealing with Chinatrust, the exploitation of personal data of Chinatrust’s 4 million credit card holders and the utilization of Chinatrust’s assets for the next wave of acquisitions.
In his own defense, Kwok said in a half-page advertisement that appeared on several local newspapers on May 27 that while he was born in Vietnam, he grew up and studied in Taiwan, married a Taiwanese woman and had a deep affection for Taiwan, which were parts of reasons he planned to invest in a Taiwanese company.
As for the proposed investment in Chinatrust, Kwok said in the ad that he believed the company is good for long-term investment. He also claimed that he had never thought of selling his stakes in Chinatrust, if he acquires them, to Chinese state-run banks for high profits as local media had speculated.
Moreover, he emphasized the investment in Chinatrust would be funded by his own capital and would meet MOEA and FSC requirements.
ADDITIONAL REPORTING BY STAFF WRITER
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