On the evening of September 5th, Guotai Junan (601211.SH) and Haitong Securities (600837.SH) announced that they are planning a merger. This transaction, the first integration of top securities companies, is expected to catalyze the merger and acquisition trend in the securities industry, and the market attention on listed securities companies with the same controlling shareholder is expected to increase.
According to the Futu Securities app, Koyasan Securities has released a research report stating that on the evening of September 5th, Guotai Junan (601211.SH) and Haitong Securities (600837.SH) announced that they are planning a merger. Haitong Securities has faced pressure on its operations and asset quality in recent years. It is worth paying attention to the subsequent stock swap price, integration plan, and the asset quality of Haitong Securities. Currently, the PB ratio of Guotai Junan and Haitong Securities is 0.88/0.70 times, and the acquisition valuation may have certain cost-effectiveness. This merger is an integration of companies with the same controlling shareholder, and the efficiency of the shareholders is relatively higher. Attention should be paid to issues such as business, licenses, and personnel integration. This transaction, the first integration of top securities companies, is expected to catalyze the merger and acquisition trend in the securities industry, and the market attention on listed securities companies with the same controlling shareholder is expected to increase.
The major viewpoints of Open source Securities are as follows:
Event: On the evening of September 5th, Guotai Junan and Haitong Securities announced that Guotai Junan plans to absorb and merge Haitong Securities through issuing corresponding shares to the shareholders of Haitong Securities in exchange for their A shares and H shares, and issue A-share stocks to raise matching funds. Both companies will be suspended from trading starting from September 6, 2024 (Friday) when the market opens.
The suspension will not exceed 25 trading days, and the merger is conducive to building a first-class investment bank and responding to regulatory calls.
Suspension arrangement: This restructuring involves A shares and H shares, with many issues and a complex process. At the same time, this restructuring is conducive to building a first-class investment bank and promoting high-quality development of the industry. According to the relevant regulations of the Shanghai Stock Exchange, the expected suspension time is not more than 25 trading days.
Merger background: Regulatory support for top securities companies to enhance their strength through mergers and acquisitions. This merger is in response to regulatory calls and aims to enhance core competitiveness and build a first-class investment bank. Haitong Securities has faced operational challenges in recent years, and the merger will help complement each other's advantages and strengthen core functions. This merger is part of the integration of Shanghai's financial state-owned assets and will help optimize the layout of Shanghai's financial state-owned assets and improve efficiency.
Expected to be the industry leader in net assets after the merger, bullish on the synergy and scale effects after the merger.
Scale and business rankings have risen. The two brokerages are similar in size. Based on the 2024 interim report data, the merged company's net assets attributable to shareholders reached 331.1 billion yuan, ranking first in the industry, surpassing Citic Securities' 279.3 billion yuan. The ranking of net revenue from brokerage business after the merger remains second, while the ranking of asset management net revenue rises to third, and the business ranking is getting closer to Citic Securities.
Improve the efficiency of capital utilization. GTJA has level one trading qualification for OTC derivatives, and integration can improve the efficiency of capital utilization. Investment in research and development and other back-office operations has scale effects.
Synergy in wealth management business. According to the Shanghai Stock Exchange, as of the end of August 2024, the number of branches of the two brokerages after the merger reached 680, surpassing China Galaxy's 473, becoming the industry leader. The significant expansion of client base is beneficial to the synergy of wealth management business.
Business departments face licensing and personnel integration. GTJA holds Huaxia Fund and GTJA Asset Management (with a public fund license); Haitong Securities holds Haifutong Fund and has an equity stake in Fuguo Fund, and fully controls Haitong Asset Management. After the integration, attention should be paid to the requirements and restrictions of "one participation, one control, one license".
This merger is the first integration of top-tier brokerages and is expected to catalyze the theme of brokerage mergers and acquisitions.
In recent years, Haitong Securities has faced pressure on its operation and asset quality. Attention should be paid to the subsequent exchange ratio, integration plan, and the asset quality of Haitong Securities. Currently, the PB ratios of GTJA and Haitong Securities are 0.88/0.70 respectively, and the acquisition valuation may have certain cost-effectiveness. This merger involves the integration of the same controlling shareholder, and the efficiency from the shareholder's perspective is relatively higher. Attention should be paid to issues such as business, licensing, and personnel integration.
Recommend Guolian Securities (601456.SH), Orient Securities (600958.SH). Beneficiaries: China Galaxy (601881.SH), China International Capital Corporation (601995.SH), Xinda Securities (601059.SH), Dongxing Securities (601198.SH), Zheshang Securities (601878.SH), Founder Securities (601901.SH), China Securities Co., Ltd. (601066.SH).
Risk reminder: The progress of the merger and acquisition may not meet expectations.
