China-Owned Brokerages Plan Merger to Create $228 Billion Entity

By Sherry Qin

Two China-owned financial institutions have agreed to merge, creating an entity with $228.28 billion in assets, as Beijing pushes to strengthen its domestic financial market.

The two companies, Guotai Junan Securities and Haitong Securities, listed on the Hong Kong Stock Exchange and the Shanghai Exchange, will merge through a share swap, they said late Thursday.

Guotai Junan will issue A shares and H shares to stockholders of smaller peer Haitong in exchange for the shares they hold. Guotai Junan separately also plans placement of its A shares for ancillary financing. The companies didn't disclose more details of the share conversion plan.

According to their latest interim results, Guotai Junan's assets are worth 898.06 billion yuan, equivalent to $126.62 billion, while Haitong's assets are worth 721.41 billion yuan, equivalent to $101.72 billion.

Once merged, the combined entity will overtake Citic Securities to become China's largest brokerage.

Chinese authorities have been pushing for consolidation in the financial services sector to deepen its capital markets.

The China Securities Regulatory Commission said in March that it aims to help ten securities to lead the industry within the next five years and hopes to build two to three brokerages that have a global impact by 2035.

In April, China's State Council issued new national-level guidelines for capital markets which support leading financial institutions to "enhance their core competitiveness through mergers, acquisitions, restructuring."

Haitong reported a 75% decline in its net profit in the first half of the year while Guotai Junan's net profit fell 13% during the period.

The combined market capitalization of the two companies after the merger will be around 237.93 billion Hong Kong dollars in Hong Kong and 216.69 billion yuan in Shanghai.

"The proposed merger is subject to approval by the board of directors and general meetings of the respective parties, and the implementation of which is subject to the approval of competent regulatory authorities," they said.

Shares of the two are on a trading halt in Hong Kong and Shanghai effective today. The trading halt for their A-shares will be no longer than 25 days, the companies said.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

September 05, 2024 21:47 ET (01:47 GMT)

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