Far Eastern Department Stores (FEDS, 遠東百貨) said yesterday it would appeal a government ruling that invalidated its recapitalization of a Far Eastern Group (遠東集團) subsidiary and cast doubt on the group’s ownership of Pacific Sogo Department Stores Co (太平洋崇光百貨).
FEDS said the decision by the Ministry of Economic Affairs’ Department of Commerce did not mean FEDS had lost control over Pacific Distribution Investment Co (太平洋流通), which manages Sogo Department Stores, the nation’s second-largest department store chain.
“This matter has nothing to do with the ownership of Sogo,” the company said in a statement.
FEDS and Pacific Distribution are controlled by the Far Eastern Group.
Citing the Company Act (公司法), the department yesterday revoked six capital injections by the group into Pacific Distribution between 2002 and 2008. Pacific Distribution’s capital must be cut to its original NT$10 million (US$300,000) from NT$4.01 billion and the previous management should be restored.
FEDS said that the group still has its seats on Pacific Distribution’s board and its management of Sogo would therefore not be affected.
“We ask the public to have faith in the company,” it said.
But the department’s ruling took a toll on FED’s shares yesterday, causing them to tumble by the 7 percent daily limit to close at NT$27.90 on the Taiwan Stock Exchange.
FEDS said it would apply for an injunction against the department’s execution of the ruling.
The lawsuit is complex, it said, calling the department’s move to invalidate the recapitalization “inappropriate.”
Market watchers said that FEDS was not willing to loosen its grip on Sogo, which accounts for as much as 80 percent of its profits.
Despite the sluggish economy, Sogo reported 30 percent growth in earnings last year to NT$2.2 billion, marking its second-best earnings growth ever.
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