Guolian Securities will issue A shares to acquire Minsheng Securities, with tota

Guolian Securities stated that, according to calculations, after the integration with Minsheng Securities is completed, its main businesses such as investment banking, fixed income, research, and asset management will enter the first echelon of the industry, becoming a quasi-top-tier securities firm.

A once obscure local securities firm is gradually realizing its expansion strategy.

Recently, Guolian Securities announced that it is planning to acquire control of Minsheng Securities and raise supporting funds by issuing A-shares. It intends to purchase a total of 10.87 billion shares of Minsheng Securities, accounting for 95.48% of its total share capital, held by Guolian Group and other transaction counterparts through the issuance of shares to purchase assets.

This comes just over a year after its controlling shareholder, Guolian Group, became a major shareholder of Minsheng Securities. In March 2023, Guolian Group won 30.30% of Minsheng Securities' shares at a high premium of 55%. Now, Guolian Securities will incorporate 95.48% of Minsheng Securities' shares under its umbrella through a share issuance acquisition.

In fact, Guolian Securities' counterattack has been planned for a long time. In 2015, a new management team began to join Guolian Securities, and subsequently, the company initiated a series of actions that attracted industry attention, including breaking into the wealth management market, actively deploying public fund business, and once planning to merge with Guojin Securities. Although the merger failed, it was enough to make the industry take notice.

Currently, Guolian Securities has issued a suspension announcement regarding the planning of significant asset restructuring, and the integration work between Minsheng Securities and Guolian Securities has officially started.

After completing the merger with Minsheng Securities, Guolian Securities may see significant improvements in assets, profitability, and business line layout. Will Guolian Securities successfully enter the top tier? "It's possible, but it mainly depends on how the later integration goes," said a securities analyst specializing in non-bank financial institutions.

The merger of the two securities firms may also initiate a new round of securities firm mergers and acquisitions. Hu Xiang, a non-bank analyst at Dongwu Securities, believes that a new wave of securities industry mergers and acquisitions is imminent. In addition to the Guolian Securities merger, several other securities firms are advancing merger and acquisition operations, including Zheshang Securities acquiring Guodu Securities, Ping An Securities merging with Founder Securities, and Hua Chuang Securities acquiring Pacific Securities.

The merger between securities firms is also encouraged by the regulatory authorities. In the second half of 2023, the China Securities Regulatory Commission (CSRC) clearly stated that it would support top-tier securities companies to excel and strengthen through business innovation, group operations, and mergers and acquisitions, to build first-class investment banks. At the end of October of the same year, the Central Financial Work Conference first proposed to "cultivate first-class investment banks and investment institutions."On April 12th, the Chinese government website released the "Several Opinions of the State Council on Strengthening Regulation, Guarding Against Risks, and Promoting High-Quality Development of the Capital Market" (referred to as the new "Nine Articles"), which also proposed to support leading institutions in enhancing core competitiveness through mergers and acquisitions, reorganizations, and organizational innovations, and encouraged financial institutions to grow and strengthen.

Guotai Junan Securities Officially Launches the Integration of Minsheng Securities

On April 25th, Guotai Junan Securities announced in a statement that it intends to acquire a total of 10.87 billion shares of Minsheng Securities, held by Guotai Group and 44 other transaction counterparts, accounting for 95.48% of its total share capital, through the issuance of shares to purchase assets. The company is currently in negotiations with the shareholders of Minsheng Securities and has signed a "Letter of Intent for Cooperation" with Guotai Group and 44 other transaction counterparts on April 25th.

Guotai Junan Securities stated in the announcement that this transaction constitutes a related party transaction and is expected to constitute a significant asset reorganization as stipulated by the "Administrative Measures for the Reorganization of Listed Companies," but this transaction will not result in a change of the actual controller of the company and does not constitute a restructured listing.

However, the specific scope of the target assets to be acquired by the listed company in this reorganization is still under negotiation, and Guotai Junan Securities stated that the final agreement will be based on the formal agreements signed by all parties.

Upon application, the trading of Guotai Junan Securities' A-shares has been suspended since the opening of the market on Friday, April 26, 2024, and the suspension is expected to last no more than 10 trading days. In light of the current planning for significant asset reorganization, Guotai Junan Securities has also withdrawn its previous 5 billion yuan private placement plan.

In fact, the earliest union between the two parties was at the beginning of 2023. On March 15, 2023, Guotai Group, with a high premium of 55%, defeated Dongwu Securities and Zheshang Securities, and successfully acquired Minsheng Securities for 9.105 billion yuan. Guotai Group also has another important listed securities company under its umbrella - Guotai Junan Securities.

Under the "one participation and one control" restriction in the securities industry, Guotai Group faces the issue of how to resolve the same-industry competition between Guotai Junan Securities and Minsheng Securities.

On December 15, 2023, the China Securities Regulatory Commission (CSRC) approved the change of shareholders of Minsheng Securities. Guotai Group became the major shareholder of Minsheng Securities. In the approval, the CSRC stated that Minsheng Securities should, in conjunction with Guotai Junan Securities and Guotai Group, proceed with the integration work with Guotai Junan Securities in a prudent and orderly manner according to the direction and timetable of the preliminary integration plan submitted.

From officially becoming a shareholder of Minsheng Securities to initiating the integration work, it took only a little over four months, and such integration speed far exceeded expectations. What the outside world is looking forward to even more is whether the merger of the two will create a 1+1>2 effect.Hu Xiang from Dongwu Securities stated that the mergers and acquisitions (M&A) of securities firms come with both benefits and challenges, where integration is more difficult than the merger itself. Through M&A, securities companies can quickly achieve regional complementarity, expand their business scale, and enhance profitability and competitive strength. However, not all mergers proceed smoothly, and they may encounter issues such as personnel loss and cultural integration.

Building a Securities Firm with Assets of Hundreds of Billions

Guolian Securities, once an obscure regional securities firm, is becoming known and noticed in the capital market through a series of capital operations after the joining of a new management team.

Data shows that Guolian Securities was established in 1992, originally known as Wuxi Securities Company; in May 2008, it was restructured and renamed "Guolian Securities Co., Ltd."

Starting from 2015, a new management team began to join Guolian Securities. Subsequently, Guolian Securities achieved A+H dual listings, being listed on the Hong Kong Stock Exchange on July 6, 2015, and on the Shanghai Stock Exchange on July 31, 2020.

In terms of business layout, Guolian Securities, which was originally unremarkable, quickly attracted industry attention through a series of actions.

Guolian Securities' wealth management transformation was the first to stand out in the market. In 2020, among the first batch of seven securities firms to obtain the pilot qualification for securities fund investment consulting, Guolian Securities was the only small and medium-sized securities firm. Since then, it has continued to exert effort in the fund investment consulting business. By the end of 2021, the contracted asset scale of its fund investment consulting business exceeded ten billion yuan. In addition, Guolian Securities also plans to establish a financial technology subsidiary.

Guolian Securities' expansion moves have long been very obvious. As early as September 2020, Guolian Securities announced its intention to acquire about 7.82% of the shares of Guojin Securities held by Changsha Yongjin. Although the reorganization ended in failure, the outside world has taken a new look at Guolian Securities.

After the completion of the merger with Minsheng Securities, Guolian Securities' strength in all aspects will be significantly enhanced.

In terms of assets, as of the end of September 2023, Guolian Securities' total assets were 89.883 billion yuan, and Minsheng Securities' total assets were 56.608 billion yuan. After the merger, the total assets of the two may reach 146.5 billion yuan, and the ranking may be improved by about 10 places, officially joining the club of securities firms with assets of hundreds of billions.In terms of revenue, based on the comparable third-quarter data of 2023 as a reference standard, Choice data shows that by the end of the third quarter of 2023, Minsheng Securities achieved a revenue of 3.644 billion yuan, with a net profit of 905 million yuan. In contrast, Guolian Securities achieved 2.507 billion yuan and 726 million yuan respectively. By combining these two data points, Guolian Securities may see an increase of more than 10 places in both revenue and net profit rankings, with the net profit ranking entering the top 20.

The 2023 annual report data indicates that Guolian Securities achieved a revenue of 2.955 billion yuan, representing a year-on-year increase of 12.68%; it achieved a net profit attributable to the parent company of 671 million yuan, which is a year-on-year decrease of 12.51%.

In terms of specific business areas, Minsheng Securities excels in investment banking. Minsheng's investment banking has consistently ranked in the top five for the number of IPO (Initial Public Offering) sponsored projects for many years. On the other hand, Guolian Securities' strengths lie in brokerage and wealth management, as well as asset management and investment business, all of which have seen significant year-on-year growth in 2023.

Guolian Securities stated that, according to estimates, after the integration with Minsheng Securities is completed, the main businesses such as investment banking, fixed income, research, and asset management will enter the first echelon of the industry, becoming a quasi-top-tier securities firm. In the future, as the ceilings for investment banking and wealth management businesses are further lifted, the company is expected to challenge the top 10 in the industry, break into the ranks of top-tier securities firms, and achieve higher quality development.