Incident: Guolian Securities announced the “Plan for Issuing Shares to Purchase Assets and Raise Supporting Funds and Related Transactions”. The company plans to purchase 100% of its total shares in Minsheng Securities from 46 counterparties including the League of Nations Group and Fengquanyu by issuing A-shares, and raise no more than 2 billion yuan in supporting capital. The company resumed trading on May 15.
The issue price is 11.31 yuan/share, and the transaction consideration and number of shares issued are yet to be determined. The Guolian Minsheng restructuring method was to purchase 100% of Minsheng Securities's shares from the 46 original shareholders of Minsheng Securities. The issue price has been determined to be 11.31 yuan/share, which is the average price for 120 trading days before the pricing benchmark. However, the estimated asset valuation and transaction price of Minsheng Securities have not yet been determined, and the number of shares issued has not yet been determined.
Simultaneously raise no more than RMB 2 billion in supporting capital to develop the Minsheng Securities business. Guolian Securities plans to issue shares to no more than 35 specific investors to raise no more than 2 billion yuan in supporting capital, and no more than 250 million shares. The issue price is not less than 80% of the average trading price of the company's stock on the 20 trading days before the first day of the issuance of the supporting capital, and not less than the net assets per share attributable to the common shareholders of the parent company that have been audited in the most recent phase of the company before this offering. After deducting intermediary fees and transaction taxes, it is intended to be used to develop the Minsheng Securities business.
The League of Nations and Minsheng have strong complementary business and regional advantages. The business integration between the two sides is expected to achieve the effect of “1+1>2” to achieve leapfrog development of listed companies. In terms of business advantages, Minsheng Securities's investment banking business strength is outstanding, and it also has strong advantages in the fields of institutional research and sales business and equity investment business; while the League of Nations Securities has distinct characteristics and advantages in wealth management, fund investment, asset securitization, and derivatives business. In terms of regional advantages, Minsheng Securities outlets focus on covering the Henan region, and the League of Nations Securities has strong market influence and high market share in Wuxi and southern Jiangsu regions.
After the merger, the net worth ranking of listed companies will rank around 20 in the industry. Based on static estimates from the end of 2023 data, the net assets of the League of Nations and Minsheng at the end of 2023 were RMB 181 and RMB 15.8 billion respectively, and the net assets after the merger were RMB 33.9 billion. It will rank 22nd among listed brokerage firms (the League of Nations ranked 37th at the end of 2023). If it successfully raises supporting capital, it is expected to rank in the top 20.
Investment advice: Optimistic about the growth space of Guolian Securities, empowered by excellent management, with epitaxial mergers and restructuring and steady endogenous development. The company is expected to achieve net profit of 5.99 million yuan and 792 million yuan in 2024-2025, respectively, -10.7% and +32.1% year-on-year (without considering Minsheng Securities). The current stock price corresponds to PB of 1.53 and 1.42 times, respectively, and maintains an “increase in holdings” rating.
Risk warning: capital markets fluctuate greatly; regulatory policies are tightening beyond expectations; the integration process and results fall short of expectations