Corporate Finance : Telecom Leads Parade Of Taiwan-Based Issuers


Taiwans Chunghwa Telecom raised $1.4 billion through a new issue of American depositary receipts in July, as the Taiwan government reduced its stake in the company.

The issue sold out quickly, as investors were attracted by the relatively high dividend yield offered by Taiwans only integrated phone-service provider. Chunghwa Telecoms ADRs trade on the New York Stock Exchange.

The Chunghwa issue was the largest of four depositary- receipt issues by Taiwan- based companies in July. Earlier in the month Taiwan Semiconductor Manufacturing, which operates the worlds largest computer-chip foundry, raised $945 million through an ADR offering.The sale represented a divestment by the Taiwanese governments National Development Fund.

Meanwhile, Goldman Sachs completed a $123 million global depositary receipt offering for Taiwan- based peripherals manufacturer, BenQ.The deal was the result of a divestment by Taipeibased Acer, a global personal- computer vendor. First Financial Holding, one of Taiwans largest financial institutions, raised about $500 million by issuing 500 million GDRs in late July.The proceeds will be used to write off the companys bad loans. According to market participants,Asian companies are likely to account for a major share of new depositary receipts for the remainder of this year. China Life Insurance and Ping-An Insurance, for example, are expected to issue ADRs in the months ahead. China Life, which controls 60% of Chinas life-insurance market, is planning to raise as much as $3 billion in an initial public offering that will include ADRs.

South Korean companies also are likely to be active issuers of ADRs, with Woori Financial and Shinhan Financial scheduled to make offerings before the end of 2003.

Interest by US investors in acquiring ADRs of Asiabased companies could be spurred by changes to US tax law this year, according to Citigroup.The bank notes that ADRs will be given equal treatment to domestic stocks with respect to dividend payments.The US tax rate on dividends was lowered to a maximum of 15%. Since Asian stocks tend to pay higher dividends than do US stocks, the Asian issues could benefit more from the tax law change.

Cycle & Carriage Launches Program

Cycle & Carriage, a Singapore- based motor-vehicle distributor and retailer, rolled out a Level 1 ADR program sponsored by The Bank of New York as depositary. Cycle & Carriage, a subsidiary of Jardine Matheson, distributes such brands as Mercedes-Benz, BMW,Toyota and Mazda. The company operates in Singapore, Malaysia, Indonesia, Thailand,Australia and New Zealand. The ADRs trade in the US over-the-counter market. One ADR is equivalent to two of the companys ordinary shares, which trade on the Singapore exchange.


Peter Hambro Mining Starts ADR Program

Peter Hambro Mining, a UK company specializing in the production of gold and silver in the eastern Russian region of Amur, launched a sponsored ADR program through The Bank of New York. The Level 1 ADRs trade in the US over-the-counter market.One ADR is equivalent to two of the companys ordinary shares, which are listed on AIM,the London Stock Exchanges global market for smaller, growing companies. We are keen to make our shares as accessible as possible to international investors, and particularly in the United States and Canada, says Peter Hambro, chairman of the Londonbased company. Many international funds that would like to invest in companies such as ours suffer restrictions with investing in AIM stocks but can acquire American depositary receipts, Hambro says.

The UK companys principal assets are 97.7% of Russian joint stock company Pokrovskiy Rudnik and 100% of the recently acquired Tokur Deposit, also in the Amur region. The acquisition will boost the groups estimated gold reserves and resources to about 19 million ounces.


Telecom Italia Issues New ADRs

Telecom Italia, Italys largest fixed-line and mobile telecommunications provider, launched new ADR programs following the merger of the company into Olivetti on August 4, 2003. Olivetti, the absorbing company in the merger, adopted the Telecom Italia name. JPMorgan Chase announced sponsored ADR programs for the new Telecom Italias ordinary and savings shares. Holders of the former Telecom Italia ADRs will have them exchanged for the new ADRs at a ratio of about 3.3 new ADRs for each old one.

The ratio of one ADR to 10 ordinary or savings shares remains unchanged. Telecom Italias shares are traded on the Italian Stock Exchange.


Mexicos SanLuis Makes Placement

Mexico City-based autoparts manufacturer, San- Luis, selected The Bank of New York as depositary for its Rule 144A program for securities not registered with the US Securities and Exchange Commission.

The SanLuis depositary receipts trade on the National Association of Securities Dealers Portal system.

SanLuis produces suspensions and brake components for the global automotive industry.The companys Rassini Chassis Systems opened a plant in Ohio in June to produce coil-spring suspensions for automobiles and pickup trucks. In the market for lighttruck suspensions, SanLuis Rassini has a 90% share of the Mexican market and a 62% share of the market in the US and Canada.


Gordon Platt