The tide of mergers and acquisitions of securities companies has begun: 4 major mergers and acquisitions are to be implemented, and "Founder + Ping An" is the most expected

Source of this article: Times Finance Author: Wu Peixuan

Looking back at the development of the securities industry in 2023, one of the key words is "mergers and acquisitions".

"Ping An + Founder", "Pacific + Huachuang", "Guolian + Minsheng" and the latest "Zheshang + Guodu", four mergers and acquisitions that need to be implemented urgently have been highly concerned by the market.

At the same time, the regulator once again spoke out, supporting the head securities companies to become better and stronger through business innovation, group operation, mergers and acquisitions, etc., to build a first-class investment bank, triggering the public's conjecture about the merger of the head brokerage, CITIC Securities and CITIC Construction Investment Securities, CICC and Galaxy Securities have been involved in merger rumors.

2024 is about to begin, and a new round of mergers and acquisitions by brokerages may reach a climax in 2024. Will the mergers and acquisitions of the four major securities industries really come to fruition, and what changes will the mergers and complementarities between businesses bring to the industry?

Image source: Picture Worm Creative

Most anticipated: Founder + Ping'an

As early as April 2021, rumors began to appear in the market that "Ping An Group intends to acquire Founder Securities". On the evening of April 30 of that year, Ping An of China (601318. SH) issued an announcement disclosing information on the progress of the reorganization of the participating Founder Group, saying that Ping An Life was authorized to participate in the reorganization on behalf of the company, and after the completion of the reorganization, Ping An of China will control the new Founder Group.

As the core subjects of the financial territory of the two groups, Ping An Securities and Founder Securities (601901. SH) has become the focus of market attention. Due to the regulatory requirement of "one participation and one control", if Ping An wants to control two securities firms at the same time, it has only one way to merge, otherwise it can only transfer the equity of Founder Securities after the reorganization is completed.

On the evening of July 5, 2021, Founder Securities announced that according to the ruling of the Beijing No. 1 Intermediate People's Court and the effective reorganization plan, the controlling shareholder of the company intends to be changed to the New Founder Group, and Ping An Life or its wholly-owned entity intends to become the controlling shareholder of the New Founder Group.

On October 21, 2021, New Founder Group was established as "New Founder Holdings Development Co., Ltd."

After more than a year, on December 19, 2022, the China Securities Regulatory Commission approved the approval of Founder Securities and other companies to change their major shareholders and actual controllers.

In this reply, the CSRC mentioned that Founder Securities should urge Ping An to formulate and report a plan within one year to solve the problems of controlling both Founder Securities and Ping An Securities, clarify the timetable and roadmap, and complete the standard rectification within five years.

Now that the one-year deadline has expired, rumors of a merger between the two companies have intensified, but so far there has been no positive response from the relevant parties. Recently, Ping An replied to the media only saying that it "will proceed from the maximization of shareholder value and steadily promote the resolution of relevant issues in accordance with the regulations and guidelines of the relevant regulatory authorities".

As of now, there is still uncertainty about whether the two brokerages will merge. However, the interpretation in the market is biased towards the merger of the two clubs and rush into the echelon of the top brokers.

In terms of scale, the total assets of the two brokerages at the end of 2022 were 443.615 billion yuan, and the total net capital was 65.683 billion yuan, ranking 11th and 10th in the industry respectively.

From the perspective of business development, the accumulation of the two brokerages in the brokerage business is relatively deep. According to the annual report of Founder Securities, as of the end of 2022, it has a total of 363 securities business departments and 23 regional branches, ranking second in the industry in terms of the number of branches. Ping An Securities, on the other hand, is based on financial technology and has a huge number of online users, and its official website shows that the number of individual customers of Ping An Securities exceeds 22 million, ranking first in the industry.

The brokerage business income of Founder Securities and Ping An Securities in 2022 will be 5.323 billion yuan and 6.545 billion yuan respectively, with a total of 11.868 billion yuan, which can rank among the "eyes" of the list, second only to CITIC Securities.

From the perspective of revenue and net profit in 2022, the total net profit of the two companies can reach 21.186 billion yuan and the total net profit will reach 6.658 billion yuan, both of which can rank 9th in the industry.

In the current four major brokerage mergers and acquisitions, the impact of the "Ping An + Founder" merger on the industry and the imagination of their respective business integration are quite large, the original two brokerages are medium-sized brokers, after the merger in terms of scale, business will become a non-negligible member of the industry. It belongs to the "strong combination".

The most tortuous: Huachuang + Pacific

After four years of entanglement, Huachuang Securities became a Pacific (601099. SH) is the most tortuous of the four major mergers and acquisitions so far.

As early as 2019, Huachuang Securities made it clear that it intended to obtain actual control of the Pacific Ocean, and planned to sign an agreement with Jiayu Investment, the largest shareholder of the Pacific at that time, with 2.2 billion yuan in cash. However, half a year later, the transaction was terminated, and Jiayu Investment refused to repay the 1.5 billion yuan deposit previously paid to it by Huachuang Securities. Thus, the litigation dispute between the two families began.

In May 2022, Huachuang Securities acquired 10.92% of the equity of Pacific held by Jiayu Investment for 1.726 billion yuan through judicial auction, and then began to go through the application procedure for the change of major shareholders of the brokerage. On the evening of December 22, 2023, the China Securities Regulatory Commission disclosed its feedback on the change of major shareholders of Pacific Securities.

The two have been entangled for four years, and Huachuang Securities is finally only one step away from entering the Pacific Ocean.

Compared with "Ping An + Founder", Huachuang Securities and Pacific are both small and medium-sized brokerages in the region, but the former is far better than the latter in terms of scale and operation. As of the end of 2022, the total assets of Huachuang Securities are 45.740 billion yuan, while the Pacific is only 15.324 billion yuan, and the total assets of the two companies are 61.064 billion yuan, ranking 43rd in the industry.

Although the scale after the merger is still small, the "highlight" of the two brokerages is in the synergistic operation. Both belong to the southwest regional brokerage, and the merger will increase the competitiveness of the two in the southwest.

Hua Chuang Securities also mentioned in the report on the change of equity in the Pacific that the Pacific has 33 branches in Yunnan Province, and the share of securities brokerage business in Yunnan Province has ranked first for many years, and it is one of the important corporate financial institutions in Yunnan Province. "This equity change is conducive to improving the influence and resource integration ability of both parties in the southwest region, deepening the interconnection of the capital market in the southwest region, realizing efficient business synergy, complementing resources and advantages, and enhancing market competitiveness and profitability. ”

The most unexpected: "League of Nations + People's Livelihood" and "Zhejiang Merchants + National Capital"

Different from the traces of the above two cases, "Guolian + Minsheng" and "Zhejiang Merchants + Guodu", these two mergers and acquisitions occurred relatively suddenly, and both occurred in 2023, which are the two major "surprises" of mergers and acquisitions in the securities industry this year.

The first is "League of Nations + People's Livelihood". Oceanwide Holdings (*ST Oceanwide, 000046.SZ) auctioned its 30.3% stake in Minsheng Securities in March 2023, attracting the majority of Soochow Securities (601555. SH), Zheshang Securities (601878. SH), Guolian Group, the starting price was 5.865 billion yuan, and after 162 rounds of bidding, it was finally won by Guolian Group at a price of 9.105 billion yuan.

On December 15, the China Securities Regulatory Commission approved Guolian Group to become a major shareholder of Minsheng Securities, and clearly mentioned in the reply that Minsheng Securities "should work with Guolian Securities and Guolian Group to promote the integration of your company and Guolian Securities in a steady and orderly manner in accordance with the direction and timetable determined by the preliminary integration plan submitted to the Commission".

At that time, Guolian Group replied to Times Finance, "Minsheng Securities and Guolian Group's securities, investment and other businesses are highly complementary, and through resource integration and business synergy, we will promote complementary advantages and achieve leapfrog development." ”

Xu Yishan of Founder Securities said in the research report, "Guolian Securities is a medium-sized brokerage with significant management alpha, and has continued to strengthen through refinancing, mergers and acquisitions of Zhongrong Fund (now renamed "Guolian Fund") and other ways. The integration plan was approved, and the integration work will be steadily promoted in the future.

Xu Yishan believes that after the merger of the two, the net capital and comprehensive strength will be greatly enhanced. "Based on the data at the end of 2022, the net assets of Guolian Securities are 16.8 billion / ranked 36th in the industry, and the net assets of Minsheng Securities are 15.2 billion, and the net assets after the merger will reach 31.9 billion / ranking 21st in the industry. ”

Although Minsheng Securities was missed, Zheshang Securities was not discouraged. Approaching the end of the year, it has added another stroke to the "war" of securities mergers and acquisitions in 2023.

On the evening of December 8, Zheshang Securities announced the acquisition of Guodu Securities. According to the announcement, Zheshang Securities intends to acquire a total of 19.15% of the shares of Guodu Securities from five companies. On the same day, Tongfang Shares, the fourth largest shareholder of Guodu Securities, also announced that it would transfer a total of 5.9517% of the shares of Guodu Securities held by its wholly-owned subsidiary. The market speculates that Zheshang Securities is very likely to win this equity, and may eventually hold 25% of the equity of Guodu Securities, becoming the largest shareholder.

Compared with the dream of "Huachuang + Pacific" hegemony in the southwest, Zheshang Securities, which is biased towards Jiangsu and Zhejiang, values the business layout of Guodu Securities in the north to achieve regional complementarity in brokerage business.

In addition, the capital strength of the two companies after the merger will also be raised to a new level. Xu Yishan said in a research report released on this merger and acquisition that at the end of the first half of 2023, the net assets of Zheshang Securities will be 26.2 billion yuan/26 listed brokers, and the net assets of Guodu Securities will be 10.4 billion yuan, and the two will reach 36.6 billion yuan/19 listed brokerages after the merger.

In 2023, the China Securities Regulatory Commission (CSRC) will encourage "leading securities firms to become bigger and stronger through mergers and acquisitions", and require accelerating the cultivation of first-class investment banks. At present, the four major M&A cases in the securities industry have kicked off, and 2024 will also become a year for the "M&A conjecture" in the industry to continue to land.