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Securities giant China International Capital Corporation has announced plans to acquire and merge with two mid-sized Chinese brokerages, Dongxing Securities and Cinda Securities, through a share exchange. The three firms signed a preliminary agreement yesterday for the asset restructuring, which still requires approval from their respective boards of directors, shareholder meetings, and regulatory authorities.
Following the completion of the merger, the combined assets of the new entity are expected to reach approximately 1 trillion yuan (about $138.9 billion), making it the fourth-largest in China, up from sixth place. The restructuring aims to help the company expedite its goal of becoming a world-class investment bank by seamlessly integrating capabilities and resources among the three firms, leveraging each other’s strengths, and achieving economies of scale along with operational synergies.
Because the reorganization involves companies listed on both the Shanghai and Hong Kong stock exchanges, the process is expected to be complex. As part of the regulatory requirements, trading in the stocks of the three companies has been temporarily halted today for up to 25 trading days.
Yesterday, China International Capital Corporation’s shares closed at 34.89 yuan (around $4.90) in Shanghai and at HKD 18.96 (about $2.44) in Hong Kong. Dongxing Securities’ shares closed at 13.13 yuan, and Cinda Securities’ at 17.79 yuan on the Shanghai Stock Exchange.
The ultimate controlling shareholder of all three companies is Central Huijin Investment, a sovereign wealth fund managed by China Investment Corporation, established by the country’s central bank. According to their latest earnings reports for the third quarter, Central Huijin holds a 40.1% direct stake in China International Capital Corporation, and indirect stakes of 78.7% and 45% in Cinda Securities and Dongxing Securities, respectively.
Central Huijin acts as a state-owned investor in key financial enterprises, aiming to preserve and grow the value of state assets within the limits of its capital contribution. It does not engage in commercial activities nor interfere in the daily operations of the companies it controls.
Earlier this year, China Cinda Asset Management, China Orient Asset Management, and China Great Wall Asset Management announced that the Ministry of Finance would transfer ownership of the country’s three largest bad debt managers to Central Huijin. This move increased the number of securities firms controlled by Central Huijin to eight, including major and smaller brokers.
Since then, speculation around potential mergers among brokerages controlled by Central Huijin has been ongoing. Rumors emerged in late February that China International Capital Corporation might merge with China Galaxy Securities, though both companies quickly denied these reports. There have also been whispers about a possible merger between Dongxing Securities and Cinda Securities.
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