Taipei, Shares in Taiwan-based Ta Chen Stainless Pipe Co. moved lower Wednesday despite the company's announcement a day earlier that it will acquire Alumax Mill Products Inc. of the United States for US$350 million, dealers said.
"Amid rising protectionism in the U.S. and trade friction between Washington and Beijing, it is a good move for Ta Chen to make to avoid the financial burden resulting from higher tariffs" Xincheng International Investment Consultant analyst Chang Chih-cheng said.
"However, due to recent gains in the wake of speculation over such a deal, investors simply locked in their profits after the stock opened higher on Wednesday," Chang said.
Shares in Ta Cheng shed 7.72 percent to close at the day's low of NT$49.00 (US$1.60), off an early high of NT$54.50, with 39.27 million shares changing hands on the Taiwan Stock Exchange, where the weighted index lost 0.51 percent to end at 10,863.94 points. Trading of the stock was suspended on Tuesday before the deal was announced after the market closed.
After opening higher the stock moved to the nearest technical resistance at NT$55.20, an intraday high seen on Sept. 22, which triggered selling that pushed the share price into negative territory, Chang said.
At a news conference held on Tuesday, Ta Chen said it will spend US$3.5 billion in cash, through a subsidiary, to acquire the total tangible and intangible assets of Texas-based Alumax, which is 100 percent owned by Alcoa's unit Arconic Inc.
The acquisition is expected to be completed in the second quarter of next year and boost Ta Chen's aluminum production capacity by 11,000 tons a month.
"The acquisition reflects Ta Chen's ambition to expand its reach overseas by building a comprehensive global production base," Chang said. "But, after the recent upturn in share price, many investors preferred to take a pause and wait for the real effects of the deal."
Ta Cheng has distributed aluminum products in the U.S. market for more than two decades, and its subsidiary, TCI, ranks as the largest aluminum wholesaler in the U.S. with an 85 percent market share after two acquisitions in 2017, according to local media.
Before Tuesday's announcement, Ta Chen announced in May that it would join forces with its affiliate to invest US$1 billion in the U.S. market, eying the rising demand for aluminum products there.
Ta Chen is working with affiliate Brighton-Best International (Taiwan) Inc. and pouring funds into the production of aluminum coils and plates in the U.S. market, in response to President Donald Trump's "America First" policy, which includes attracting investment and creating more jobs in the U.S.
Source: Focus Taiwan News Channel