Taipei, May 16 (CNA) Shares of Chimei Innolux Corp., Taiwan's largest flat panel maker, moved higher Wednesday morning after the representatives from majority shareholder Chi Mei Corp. resigned as directors and supervisors, dealers said.
The retreat of the Chi Mei camp from Chimei Innolux's management has raised hopes that the Hon Hai Group, another key shareholder of the flat screen supplier, will take over the company's management, a development expected to eliminate resistance when the panel maker's board considers expansion policies, they said.
As of 12:17 p.m., shares of Chimei Innolux had added 2.56 percent to NT$12.00 (US$0.41), off a high of NT$12.35, with 31.24 million shares changing hands, while the weighted index was down 1.47 percent at 7,287.02.
"The resignation of the Chi Mei representatives is paving the path for Hon Hai to take control of Chimei Innolux," Mirae Asset Management analyst Arch Shih said.
"The market has widely anticipated that once Hon Hai takes control of the board, it will provide sufficient financial support to Chimei Innolux, which is in a down cycle along with the global flat panel business," Shih said.
In a filing to the Taiwan Stock Exchange, conglomerate Chi Mei said its representative Lin Ching-sheng has resigned as a director of Chimei Innolux, while another two representatives, Lin Jung-chun and Sung Kuang-fu, have stepped down as supervisors.
Chi Mei said that despite the resignations, the company, as a shareholder of Chimei Innolux, will continue to support the flat panel company's management and keep its promise to participate in rights issue activities planned over the next few years.
According to Chimei Innolux's annual report, Chi Mei holds a 13.57 percent stake in the flat panel maker, while Hon Hai Precision Industry Co., the flagship company of Hon Hai Group, owns a 1.77 percent stake.
Hon Hai Group subsidiaries Foxconn Technology Co. and Hyield Venture Capital Co. have 1.52 percent and 2.10 percent shares, respectively. Hon Hai Group Chairman Terry Gou has a 2.91 percent stake in the company.
In March, Tuan Hsing-chien, who also comes from the Hon Hai Group, replaced Chi Mei's representative Frank Liao as Chimei Innolux chairman after Liao stepped down for health reasons.
"I think Hon Hai has moved a step closer to gaining solid control of Chimei Innolux's board after the Tuesday announcement," Shih said.
Shih said it was possible that Hon Hai would try to upgrade Chimei Innolux's technology through know-how transfers from Sharp of Japan, in particular in the development of active-matrix organic light-emitting diode (AMOLED) panels Chimei Innolux is eyeing to boost its competitiveness.
Earlier this year, the Hon Hai Group announced a deal to acquire just under a 10 percent stake in Sharp, while the Taiwanese group has also agreed to acquire half of the Japanese company's 93.0 percent interest in a huge LCD plant in western Japan.
"Hon Hai is expected to do what it wants to do to transform Chimei Innolux," Shih said.
(By Pan Chi-i and Frances Huang)