China International Capital Corp (CICC) plans to absorb two smaller brokerages to create a new entity worth 1 trillion yuan (US$140 billion) in assets, as a state-led consolidation gathers pace to meet Beijing’s goal of creating investment banks that can compete with the likes of Goldman Sachs.
CICC would take over Dongxing Securities and Cinda Securities through stock swaps with the shareholders of the two peers, it said in an exchange statement on Wednesday night, without giving details. Shares of the three companies will be suspended from trading on the Shanghai exchange for up to 25 days. The deal was pending approval from the companies’ boards, shareholders and the regulators, it said.
The revamp would consolidate and complement the companies’ resources and strengths, which in turn would bring economies of scale, better serve the state’s strategy and the economy and boost shareholder returns, according to the statement.
The merged brokerage’s total assets of 1 trillion yuan would rank it fourth after Citic Securities, Guotai Haitong Securities and Huatai Securities, according to data provider Wind Information.
The deal would be the most high-profile after the merger between Guotai Junan Securities and Haitong Securities last year, which created an industry giant with 1.68 trillion yuan in assets. It was also conducted through a stock swap, with Haitong ending its listing status on the Shanghai exchange.
The consolidation in China’s 12 trillion yuan brokerage industry has been accelerating over the past year, with smaller players also seeking mergers to survive in a sector that was whipsawed by years of stock market downturn and pay cuts. Guolian Securities’ acquisition of Minsheng Securities and Zheshang Securities’ takeover of Guodu Securities are among some of the notable ones.
CICC had total assets of 764.9 billion yuan at the end of the third quarter, Dongxing had 116.3 billion yuan and Cinda had 128.2 billion yuan, according to their quarterly reports.
Central Huijin has a 40 per cent stake in CICC, and controls a 45 per cent interest in Dongxing and a 79 per cent stake in Cinda through its units. The state investment vehicle is also a major shareholder of China Galaxy Securities, Shenwan Hongyuan Group and Great Wall Glory Securities.
The restructuring was likely to fan speculation about more mergers of brokerage units controlled by Central Huijin, according to Soochow’s Sun.
Source: Financeyahoo