SHANGHAI, March 11 Guotai Junan Securities Co
Ltd, China's third-largest stock broker by profit,
plans to acquire a controlling stake in its sister firm,
Shanghai Securities Co Ltd, two sources with knowledge of the
matter told Reuters on Tuesday.
Guotai's purchase of a 51 percent stake will help the broker
meet regulatory requirements for its planned Shanghai Stock
Exchange initial public offering (IPO).
Regulations from China Securities Regulatory Commission
(CSRC) specify that a brokerage can only list if there are no
more than two brokerages within its parent's group, one majority
held, the other owned in the minority. Shanghai International
Group, the parent company of both brokerages, currently holds
only minority stakes in each.
Guotai officials declined to comment on the transaction,
while Shanghai Securities officials could not be reached for
Guotai will make part of the payment ahead of its IPO, with
the remainder to be financed from equity proceeds after it
lists, the sources said. They added the deal would likely be
concluded by the end of March, but did not disclose a purchase
Guotai's application to list, which will be sponsored by
China Galaxy Securities Co Ltd and Huarong Securities,
is currently being considered by the CSRC.
The registered capital of Shanghai Securities is 2.61
billion yuan ($425.19 million) and its shareholders are Shanghai
International Group and its subsidiary, Shanghai International
Trust Co Ltd. Shanghai International Group Co Ltd currently
holds 46.74 percent of Guotai's shares and is its largest
There have been a spate of mergers and acquisitions between
brokerages in China recently, as the market consolidates.
Founder Securities Co Ltd announced plans to merge
with China Minzu Securities for 13.2 billion yuan in January,
while Shenyin & Wanguo Securities announced its purchase of Hong
Yuan Securities Co Ltd in October last year.
($1 = 6.1385 Chinese yuan)
(Reporting by David Lin and Adam Jourdan; Writing by Shanghai
Newsroom; Editing by Matt Driskill)