FSC to tighten tender offer rules

The Financial Supervisory Commission (SFC), Taiwan's top financial regulator, said Thursday that it will tighten the rules governing the implementation of tender offers after a botched deal proposed by a Japan-based firm to buy a stake in Taiwan's gaming software developer XPEC Entertainment Inc. (????), which caused massive losses for investors.

In a hearing held by the finance committee of the Legislative Yuan, FSC Chairman Ding Kung-wha (???) told lawmakers that the commission is determined to protect the interests of investors and will not allow an XPEC-like case to be repeated.

Ding said that the FSC aims to revise regulations so that a suitor who proposes a tender offer will have to submit confirmation by financial consultants or certified auditors to show that the buyer has the financial ability to carry out the deal.

Ding said that contract bonds issued by financial institutions will serve as an alternative way to guarantee that the suitor will honor the tender offer deal.

According to the FSC, the move to have contract bonds issued by financial institutions will no doubt raise acquisition costs in a tender offer, but will prevent investors from suffering losses resulting from a failed deal.

The move to tighten the rules came after Japan-based Bai Chi Gan Tou Digital Entertainment Co. (????) announced Aug. 30 that it was withdrawing a tender offer that it proposed in late May to buy 38 million XPEC shares, or 25.17 percent of the company, at NT$128 (US$4.09) per share, an almost 22 percent premium over XPEC's share price at the time.

The decision by Bai Chi Gan Tou to walk away from the deal caught the market off-guard and led to a plunge in XPEC shares, which caused massive losses for many investors who had bought XPEC shares.

Even before the Japanese suitor decided to drop the tender offer, the company repeatedly extended the deadline of the settlement of the transactions in mid-August, which also affected XPEC shares.

In early June, XPEC shares hit NT$114 at one point after the tender offer was announced, but the stock trended sharply lower, due to the botched deal. The stock closed at NT$37 on the over-the-counter market Wednesday.

The failed tender offer prompted the FSC and prosecutors to begin an investigation into any irregularities. The prosecutors launched a raid on XPEC's headquarters and Bai Chi Gan Tou's office in Taipei, and summoned many people related to the case, including XPEC Chairman Aaron Hsu (???), who has been named as a defendant in the case.

The FSC said that the revised rules will bar suitors in tender offers from altering their acquisition timeframes in a bid to avoid any repetition of the move by Bai Chi Gan Tou to extend the deadline of settlement of the transactions of XPEC shares.

The commission said it will continue its probe the XPEC case and will hold those related to the failed acquisition deal accountable.s

Source: Focus Taiwan News Channel