Citic Securities rises on RM8b purchase of rival

By BLOOMBERG

SHANGHAI • Citic Securities Co jumped yesterday on resuming trading in China, after it announced it will pay as much as 13.5 billion yuan (RM8.19 billion) to buy Guangzhou Securities Co.

The nation’s largest brokerage will sell 793.2 million shares at 16.97 yuan each to Yuexiu Financial Holdings Group and its unit to buy all of Guangzhou Securities, Citic Securities said in an exchange filing late on Wednesday. Its China-listed shares rose 4.9% yesterday, the biggest gain since October.

“The price of the acquisition, at a price-to-book ratio of 1.2 to 1.3 times, is lower than the market expectation,” said Luo Zuanhui, a Shenzhen-based analyst at Tianfeng Securities Co.

Citic Securities’ strategic expansion amid the market downturn boosts the firm’s relatively weak presence in southern China, he said.

An anticipated consolidation among Chinese brokerages has fuelled a rally this year after the sector slumped in 2018, and there’s more room to rise as valuations are far from their 10-year average.

A Bloomberg gauge of China-listed securities firms has gained about six times more than the broader benchmark index.

Citic Securities has acquired a number of brokerages over the years, including Credit Agricole SA’s CLSA Ltd in 2012, Wantong Securities Co and Goldstone Securities Co.

The purchase of Guangzhou Securities will strengthen Citic Securities’ presence in southern China after its failed bid to buy a stake in GF Securities Co in 2004.

Guangzhou Securities will spin off a 99% stake in Guangzhou Futures and 24% in fund-management company Golden Eagle before the transaction.

Citic Securities’ shares had been suspended since the preliminary deal was announced after the market shut on Dec 24.