CITIC Securities to Acquire Guangzhou Securities; M&As Tipped To Stimulate Sector
Li Juan
/SOURCE : yicai
CITIC Securities to Acquire Guangzhou Securities; M&As Tipped To Stimulate Sector

(Yicai  Global) Dec. 25 — CITIC Securities, a major Chinese securities broker,  plans to acquire a small brokerage firm, Guangzhou Securities. Experts  believe mergers and acquisitions could be a good solution amid a weak  market.

CITIC  Securities intends to acquire 100 percent equity in south China-based  Guangzhou Securities through the issuance of shares, and has penned a  deal with the latter's shareholders and Guangzhou Yuexiu Financial  Holdings, it said in a statement issued late yesterday.

China's  A-share market has been in a downturn this year, and many small- and  medium-sized brokers have suffered losses, so seeking help through M&As  is a reasonable step, a Shenzhen-based investment banker told Yicai  Global. Major brokers, meanwhile, can quickly grab market share through  M&As, the banker added.

The  two parties will not have to finance any other arrangements if they  make the acquisition through share swap. The key is that the two parties  agree to a mutually satisfactory share conversion ratio, an insider said. 

Guangzhou Securities fell into losses in the first half of the year. It gained an operating income of CNY801 million (USD116.4 million) but suffered a net loss of CNY30 million in the first half of the year.  CITIC Securities' operating income in the first half of the year was  nearly CNY20 billion, and the net profit attributable to shareholders of  the parent company reached CNY5.6 billion. So, the latter far surpasses  the former in terms of all business standings in the sector.

CITIC  will increase its market share after the M&A, the insider noted,  saying the expansion will pave the way for CITIC to take back the  leading position from its rival Huatai Securities.

CITIC's  market share was 6 percent in the first half while Guangzhou Securities  was 0.45 percent, with the current sector leader Huatai Securities at  6.6 percent, public data shows.

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Keywords: M&A , Industry Analysis , CITIC Securities