The exchange ratio between A-shares and H-shares is 1:0.62, meaning that every 1 share of Haitong Securities stock can be exchanged for 0.62 shares of similar type of GTJA stock.
The controlling shareholder will increase its holdings of GTJA shares based on the net assets per share, above the pre-suspension stock price, and commit not to reduce holdings within 5 years.
After the merger, the company will further strengthen its functional positioning, accelerating its progress towards becoming an international competitive and market-leading investment bank.
Caixin News Agency reported on October 9th (Reporter Lin Jian) that the original plan was to suspend trading for 25 trading days. $Guotai Junan (601211.SH)$ /$GTJA (02611.HK)$ and $Haitong (600837.SH)$ /$HAITONG SEC (06837.HK)$ Resume trading tomorrow, 8 trading days earlier than the original plan to resume trading on October 22.
On October 9, the two companies simultaneously released merger and reorganization related proposals and joint announcements on the Shanghai Stock Exchange and the Hong Kong Stock Exchange. Overall, in this transaction, based on the principles of strong alliance, complementary advantages, and equal merger, Guotai Junan Securities will absorb and merge Haitong Securities through stock exchange. The merged company will further strengthen its functional positioning, take the service of building a financial power and the construction of the Shanghai International Financial Center as its mission, benchmarking international first-class, accelerating towards an investment bank with international competitiveness and market leading strength.
It is worth noting that the independent financial advisor for the absorption and merger in this case is Orient Securities, with BOC International being the acquired party.
What new values in this highly market-focused acquisition and merger are worth paying attention to? As summarized by the journalist, there are six core aspects:
Focus one: What is the stock exchange ratio? The exchange ratio for AH stocks is 1:0.62.
According to the announcement, the stock-for-stock merger this time will exchange stocks at market prices, with A shares and H shares set at the same exchange ratio to effectively balance the interests of all shareholders. The two companies will determine the A share exchange price based on the average trading price of A shares over the 60 trading days prior to the announcement date of the board resolution, and based on this, the A share to H share exchange ratio will be 1:0.62, meaning that every 1 share of Haitong Securities stock can be exchanged for 0.62 shares of similar type of gtja stock.
Specifically, the gtja exchange price is 13.8 yuan/share, and the H share is 7.7 Hong Kong dollars/share (current gtja stock price is 14.7 yuan/share, H share is 7.9 Hong Kong dollars/share, with a dividend payout of 0.15 yuan/share); 3) Haitong's exchange price is 8.6 yuan/share, and the H share price is 4.8 Hong Kong dollars/share (current Haitong stock price is 8.8 yuan/share, H share is 3.6 Hong Kong dollars/share, with a dividend payout of 0.03 yuan/share).
Focus Two: How to protect the legitimate rights and interests of small and medium shareholders? Provide the right to choose cash.
According to the announcement, the stock-for-stock merger this time will provide acquisition request rights to dissenting shareholders of gtja who meet the conditions, and provide the right to choose cash to dissenting shareholders of Haitong Securities who meet the conditions, with the price being the highest transaction price of A shares and H shares over the 60 trading days prior to the announcement date of the board resolution, fully reflecting the protection of small and medium shareholders.
Focus Three: How is the confidence in the implementation of the merger plan demonstrated? Controlling shareholders initiate targeted increases in shareholding.
It is worth noting that, based on the stock-for-stock merger this time, gtja plans to issue no more than 10 billion yuan of A shares to the controlling shareholder, Shanghai State-Owned Assets Operation Co., Ltd., to raise matching funds. The controlling shareholder will make a targeted increase in gtja shares based on net assets per share, at a price higher than the pre-suspension share price, and commit not to reduce their holdings within 5 years, fully demonstrating firm confidence in the company's future development.
Focus Four: What are the expectations for the timing of this merger? A strong combination to create a first-class investment bank, aiming to achieve at least six 'firsts'.
The merger of gtja Securities and Haitong Securities is becoming a milestone event in the recent development history of China's capital markets, with discussions continuing to heat up, encompassing speculations about the post-merger scenario and expectations for deepening reforms and high-quality development of China's securities industry.
China International Capital Corporation and Haitong Securities stated that this merger will promote the creation of a top-tier investment bank with international competitiveness and market leadership. The company will focus on leveraging its role as a 'service provider' of direct financing, 'gatekeeper' of the capital market, and 'manager' of social wealth, to enhance China's international competitiveness and tailor market leadership to meet customer demand, injecting strong momentum into the innovation and development of the capital markets and securities industry. Journalists found that all six key business data of the merged company rank first, highlighting the outline of a 'top-notch investment bank.'
Firstly, the total IPO underwriting amount of the two companies in 2023 ranks first in the industry, leading the second by more than 50%; Since the launch of the STAR Market, the total IPO underwriting amount on the STAR Market reached 209.3 billion yuan, with a total of 107 IPO underwriting cases, both ranking first in the industry, significantly expanding the advantages of the STAR Market business.
Secondly, the merged company leads comprehensively in retail, institutional, and corporate client scale. According to publicly disclosed data from the 2023 annual reports, the total number of retail customers for the two companies reached 35.93 million households, and net revenue from seat rentals reached 1.6 billion yuan. The number of A-share IPO sponsorships reached 44, all ranking first in the industry. With 343 branches in key regions like the Yangtze River Delta, Beijing-Tianjin-Hebei, and the Pearl River Delta, the company soared to the top in the industry, optimizing its branch layout further.
Thirdly, in terms of wealth management business, the merged company's securities brokerage, futures brokerage, and margin financing business all jumped to first place in the industry.
Furthermore, the leading advantage in digital technology of the merged company will be further solidified. The total monthly active users of the retail client apps of the two companies consistently rank first in the industry, while the institutional client apps cover a wide range of scenarios, potentially leveraging cutting-edge digital applications to improve customer service experience, optimize business models, and lead the industry in digital technology development.
Regarding institutional and trading business, revenues from public distribution and custody outsourcing jumped to first place in the industry. The capabilities in equity derivatives and FICC business significantly improved, complementing each other's licenses and strengthening capabilities to solidify comprehensive service advantages, further expanding the institutional client ecosystem.
As of the end of June, the total assets and net assets of the merged company amounted to 1,619.5 billion yuan and 331.1 billion yuan, respectively, both ranking first in the industry. The overall structure of assets is more balanced, significantly enhancing the risk-bearing capacity, expanding the capital utilization space, and improving capital efficiency of the merged company.
Focus Point Five: What will be the name of the new entity? Looking forward to the outcome.
The announcement states that after the delivery date, GTJA will handle the registration procedures for changes in the company name, registered capital, etc., while Haitong Securities will cancel its legal person status. The merged company will adopt a new company name and take a series of measures to establish a new corporate governance structure, management framework, development strategy, and corporate culture in accordance with the applicable laws and regulations at that time and the specific circumstances of the merger.
According to Tianyancha's intellectual property information, recently, Guotai Junan Securities Co., Ltd. has applied to register trademarks "Guotai Haitong", "Haitong Guotai", and "Guotai Junan Haitong", with international classification for financial asset management and office supplies. The current status of these trademarks is waiting for substantive examination.
It is worth noting that historical experience shows that the landing of the merger proposal may slightly boost the brokerage sector's M&A expectations.
Focus point 6: How to view the valuation increase after the merger? Two factors influencing.
A non-banking team from a brokerage firm commented that they are bullish on the valuation increase for both parties. This valuation increase comes from two aspects: first, the premium brought by the merger itself, and secondly, the reversal of the brokerage sector during this period. First, the valuation of the brokerage sector has rapidly increased. Since the suspension on September 6th, the brokerage sector has risen by 47%, with the top players, Citic Securities +59%, China Merchants Securities +52%, Huatai Securities +39%, GF Securities +38%; secondly, the merger proposal this time brings a certain amount of synergies from the merger.
Editor/Emily
