03.29.2001
CDIB to acquire Grand Cathay Securities through share purchase

• China Development and Industrial Bank (CDIB, 2804 'Kai Fa') yesterday announced the acquisition of Grand Cathay Securities Co. (6003 'Da Hua Zheng') through the purchase of public shares. The acquisition is the first of its kind in Taiwan.

• CDIB will announce its target share price today and hopes to finalize the entire acquisition by April. The purchase of the securities company is part of CDIB's transformation into a financial holding company. The bank is considering a merger with another undisclosed bank through share swap once the financial holding company law is passed, likely by June.

• As the largest shareholder in Grand Cathay, Jen Hwa Investment Co. (unlisted) holds around 22%. Jen Hwa's KMT background is fueling rumors that politics is behind the acquisition. In order to gain control of Grand Cathay, CDIB has to obtain more than 23% of public shares. CDIB has not yet decided the fate of acquired shares should it be unable to reach the 23% mark.

• Grand Cathay's share price rose 40% in the four days prior to CDIB's announcement, triggering the attention of the Securities and Futures Commission. We advise caution on stock purchase in securities companies.

WilliamFong@Primasia.com +886-[0]2-2547-8864