[Exclusive] Central Huijin to Exclude Foreign Investors From Its Shareholding in CICC

[Exclusive] Central Huijin to Exclude Foreign Investors From Its Shareholding in CICC

Du Qingqing & Xu Wei

Date: Fri, 04/13/2018 - 21:32 / source:Yicai
[Exclusive] Central Huijin to Exclude Foreign Investors From Its Shareholding in CICC
[Exclusive] Central Huijin to Exclude Foreign Investors From Its Shareholding in CICC

(Yicai Global) April 13 -- Central Huijin Investment Ltd., state-owned investment firm, will transfer a major part of its shareholdings in China International Capital Corporation [HK: 3908], CICC, an investment bank, to a legally-established entity in China, which is able to meet requirements of new regulations, Yicai Global learned from insiders. This means there will be no opportunity for foreign investors to buy the company’s shares.

The new regulations refer to the requirements of qualifications specified in the Regulations on the Administration Over Securities Companies’ Equities (Draft for Comments) released on March 30.

A statement saying that Central Huijin Investment will openly sell its 398.5 million shares in CICC was posted on the website of Beijing Financial Assets Exchange, BFAE, on April 11, with May 9 as the deadline. The above assets are estimated at CNY5.05 billion (USD802 million), with a listing price of CNY5.41 billion.

New Requirements

China Securities Regulatory Commission (CSRC) published the new regulations on March 30, with one-month comment period.

In the new regulations, CSRC defines strict criteria for the qualifications of securities companies’ shareholders. The threshold for controlling shareholders’ net assets has been significantly lifted. The threshold for major shareholders as only CNY200 million in the former Securities Law, has risen to CNY100 billion.

Moreover, there are more detailed requirements on profitability. Under the new regulations, major shareholders should make profits for three years in a row, or five years for controlling shareholders. Additionally, the equities of securities companies actually held by a single non-financial enterprise should not exceed one-third of the total.

There are also more restrictions over connected transactions, under which the shareholder and actual controller of a securities company shall not ask the company or affiliated parties to offer financing or guarantee.

Central Huijin’s move is not directly related to the timing of the release of new regulations, one insider said, adding it is mostly about other considerations like the fund demand of Central Huijin Investment related to asset management, the optimization of CICC’s shareholder structure, and the introduction of quality investors.

“Moreover, for the selection of offeree, the latest requirement on the qualifications of securities companies’ shareholders in the draft for comments has been taken into account,” the insider added.

It is impossible to speculate on this transfer by taking advantage of timing issues, the insider added, saying, given the criteria specified in the statement, the requirements in the new regulations have been based on prudence to follow the trend for regulations, find qualified investors and choose a potential offeree up to the standards.

Editor: Mevlut Katik

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Keywords: China International Capital Corporation, Central Huijin Investment