According to the Zhongtong Finance APP, Soochow Securities has released a review stating that the merger efficiency of GTJA (601211.SH, 02611) and Haitong Securities (600837.SH, 06837), the two brokerage giants, exceeds expectations. This merger will be more complementary than redundant, helping to establish a top-notch investment bank with international competitiveness. It is reported that on October 9, 2024, GTJA (601211.SH) and Haitong Securities (600837.SH) announced the merger plan of the two brokerages and are planning to resume trading on October 10.

Event Overview: On October 9, 2024, GTJA and Haitong Securities released relevant merger and reorganization plans and a joint announcement, with plans to resume trading on October 10, 8 trading days earlier than the estimated suspension time of A shares announced previously. This merger will see GTJA absorb and merge with Haitong Securities by issuing A shares not exceeding 10 billion yuan to the controlling shareholder, Shanghai State-owned Assets Supervision and Administration Commission, to raise ancillary funds.

The main points of Soochow Securities are as follows:

1. The rapid landing of the merger plan and early resumption of trading, with the merger efficiency exceeding expectations.

1) Pricing benchmark: The A share swap price for GTJA and Haitong Securities is determined based on the average A share trading price of the 60 trading days prior to the board resolution announcement date. After adjusting for ex-rights and ex-dividend, the A share swap prices for GTJA are 13.83 yuan/share and 7.73 HKD/share for H shares, while for Haitong Securities, they are 8.57 yuan/share and 3.58 HKD/share for A shares and H shares respectively. Calculations show that the H share swap price for Haitong carries a 34% premium over the past 60-day average price, which aligns with the customary practice in the Hong Kong market by providing a certain premium to the acquired party.

2) Swap ratio: Under the principle of equal rights for the same shares, the A shares and H shares have the same swap ratio in this transaction, both set at 1:0.62 (each share of Haitong Securities can be swapped for 0.62 shares of GTJA of the same class).

3) Cash put option: For dissenting shareholders, the highest fill price in the 60 trading days prior to the pricing reference date of Haitong Securities is selected as the cash put option price, with cash put option prices of 9.28 yuan/share for Haitong Securities A shares and 4.16 Hong Kong dollars/share for H shares.

4) Fund raising for matching funds: Guotai Junan plans to issue A shares to its controlling shareholder, Shanghai State-owned Assets Supervision and Administration Commission, raising no more than 10 billion yuan to supplement capital, support business development, supplement working capital, repay debts, and pay for M&A integration expenses related to this transaction.

5) New company naming: Guotai Junan announced that after the closing date, it will handle the industrial and commercial change registration procedures related to the company name and registered capital, while Haitong Securities will cancel its legal entity status. The merged company will adopt a new company name.

2. Building a first-class investment bank with international competitiveness through synergies that complement each other rather than redundant overlaps.

1) Improved capital utilization efficiency: After the merger is completed, the new company's attributable net assets will reach 331.1 billion yuan, ranking first in the industry. Additionally, the company is expected to optimize risk control indicators through high regulatory ratings and improve efficiency through more proactive asset allocation.

2) Enhanced professional service capabilities: Guotai Junan and Haitong Securities have deep complementary resource endowments. After the merger is completed, the new company's brokerage business revenue, IPO underwriting scale, public offering warehousing commission income, and other key indicators will all rank first in the industry, significantly enhancing the company's comprehensive service capabilities.

3) The problem of "one participation, one control, one license" is expected to be properly resolved: During the transition period after the completion of the transaction, the integration issues of multiple public fund licenses under Guotai Junan and Haitong Securities are expected to be resolved, and the new company will formulate the most favorable development plan. Huaan Fund and Haifutong Fund each have their own characteristics and advantages, and are expected to maintain a good development momentum during the transition period.

Investment advice

Capital market supportive policies are being implemented in batches, with the consolidation of brokerage giants providing a catalyst. Soochow Securities firmly bullish on the non-banking sector. With the release of the trading plan by GTJA and Haitong Sec, the two brokerages are expected to have significant room for upward correction after resumption of trading, further catalyzing sector performance.

1) Fintech: Recommend Beijing Compass Technology Development (300803.SZ), Hithink Royalflush Information Network (300033.SZ), East Money Information (300059.SZ), suggest paying attention to Shenzhen Fortune Trend Technology (688318.SH).

2) Brokerage: Recommend CSSW Securities A (600030.SH), suggest focusing on HTSC (601688.SH), China Merchants (600999.SH), GTJA (601211.SH).

3) Insurance: Recommend New China Life Insurance (601336.SH), China Life Insurance (601628.SH), Ping An Insurance (601318.SH).

Risk Warning: 1) Significant fluctuations in the equity market; 2) Uncertainties exist in merger and reorganization activities.