Sat, Jun 01, 2002 page18

• Merrill Lynch falls from its perch

  NOT SO POPULAR TSMC and four other Taiwanese companies passed over the biggest securities firm by capital when looking for an agent to sell their shares

  • BLOOMBERG
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  Merrill Lynch & Co, Asia's top arranger of share sales last year, fell to seventh place this year, failing to win a share of US$2 billion of business in Taiwan, where it's the No. 2 foreign broker.

  The biggest securities firm by capital wasn't hired to sell shares for Taiwan Semiconductor Man-ufacturing Co (TSMC, 台積電) and four other companies in the nation, which accounted for more than half the US$4.3 billion of stock sold to global investors this year by Asian companies outside Japan.

  "Taiwan is becoming increasingly important given the state of the markets elsewhere in Asia," said Ernest Ip, a partner at PricewaterhouseCoopers' capital markets service group. "All the banks need a good presence in Taiwan or they will be dead in the water."

  Investment banks are chasing fees from bond and share sales by computer-related companies and banks in Taiwan that need money to expand as the nation emerges from recession. Merrill says it's suffered from the loss of key bankers in Taiwan, including David Kao, its former investment-banking director in Taiwan, who left to join a unit of J.P. Morgan Chase & Co in September.

  "It's not as if we're not at the party," said Ajmal Rahman, Merrill's co-head of investment banking in Asia outside Japan.

  "What we should be doing is leading the party. You can't expect to win the spoils when you've been through a bit of turnover in your ranks." Goldman Sachs Group Inc is the No. 1 manager of global share sales in Asia outside Japan this year, capturing a quarter of the market by selling US$1.1 billion of shares for TSMC. The chipmaker's Chairman, Morris Chang (張忠謀), serves on Goldman's board.

  Cathay Financial Holdings Ltd (國泰金控), Taiwan's biggest financial group, hired Goldman earlier this year to sell US$700 million of bonds convertible into its stock.

  Chunghwa Picture Tubes Ltd(中華映管), Taiwan's second-largest maker of flat-panel displays, plans to sell as much as US$971 million of shares and convertible bonds to finance two new plants. Goldman will manage those sales.

  Hon Hai Precision Industry Ltd(鴻海) and Chi Mei Optoelectronics Corp(奇美)are among other Taiwan-based companies planning share sales.

  Merrill's research on Taiwan companies ranked third behind UBS Warburg and Credit Suisse First Boston, according to last year's poll of investors by AsiaMoney magazine. Merrill's brokerage share among foreign firms in Taiwan trailed only UBS Warburg this year, according to the island's stock exchange.

  Still, it has half as many bankers focused on Taiwan as some of its rivals. Samuel Poon, Merrill's co-head of investment banking in Asia outside Japan, is also covering Taiwan until a new banker can be hired.

  "As yet, we have not had a high profile addition or enhancement to the team," Rahman said. "We're planning to step up further coverage." Merrill's success last year managing share sales owed much to its China business, run by Charles Li and Erh Fei Liu. It helped CNOOC Ltd, the third-largest oil company, raise US$1.43 billion from an initial public share offering. Chinese companies may also provide the bulk of fees this year.

  CNOOC has hired Merrill to advise on the sale of shares in its oil services and shipping units later this year. The sales may raise as much as US$400 million.

  It's one of three banks that will arrange a share sale by China Telecommunications Corp, an offer previously estimated by analysts to be worth as much as US$8 billion. The sales may proceed before the end of this year, bankers said.
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