Zhongxin Jingwei, December 24 (Ma Jing) Recently, in response to the change of shareholders of Pacific **, the China Securities Regulatory Commission disclosed three feedbacks, all of which are related to the proposed shareholder Huachuang**.
Huachuang ** has won the Pacific **10 since May last yearAfter 92% of the shares, the market has been expecting mergers and acquisitions between the two parties. Now, after more than a year, the regulator has focused on the rectification of the withdrawal of fines by Huachuang ** Investment Bank, and the risks of proprietary and asset management business.
China Venture Investment Bank's withdrawal of fines and proprietary business risks have attracted attention.
First, the China Securities Regulatory Commission (CSRC) requires Hua Chuang** to explain whether it has fulfilled complete resolution procedures for its shareholding in Pacific **, including but not limited to the resolution and information disclosure procedures of listed companies. Second, in September 2023, Huachuang ** was issued a warning letter due to issues such as the failure to effectively implement the internal control opinions of the partially withdrawn project of the investment banking business and the failure of the kernel committee to perform its duties, and the CSRC required it to explain whether it had rectified the relevant issues. The third is to require Huachuang to sort out the self-operated business, asset management business and subsidiary management, and assess whether there are risks.
Huachuang** is the only ** company in Guizhou Province, while Pacific ** is rooted in Yunnan, and both sides are located in the southwest region. Judging from the revenue in the first half of 2023, Huachuang** achieved revenue of 155.7 billion yuan, a year-on-year increase of 3203%；Net profit 38.5 billion yuan, a year-on-year increase of 8879%。Pacific** achieved revenue of 74.9 billion yuan, an increase of 117% and net profit of 21 billion yuan, from loss to profit.
As early as 2019, Huachuang ** was willing to acquire part of the equity of Pacific **, and paid a deposit of 1.5 billion yuan to Jiayu Investment, the largest shareholder of Pacific **. However, the trading environment changed in the later stage, and the two parties gave up the transaction, but Jiayu Investment did not return all the deposits as agreed, so it was sued by Huachuang**. Finally, on May 27, 2022, Huachuang ** ended with 172.6 billion yuan to bid for the Pacific **10. held by Jiayu Investment92% of the shares, and once the transfer is successful, it will be the largest shareholder.
Although there has been a lot of discussion in the capital market about the merger of Huachuang ** and Pacific **, the equity change has been progressing slowly. Until September 21 this year, the Pacific ** announced that the China Securities Regulatory Commission accepted the administrative application for shareholder change. Now, more than two months later, there has been new progress in the change of shareholders.
The investment banking fines mentioned in the regulatory feedback refer to the fact that in September this year, due to violations such as the small scope of salary deferred personnel in the investment banking business, Ye Haigang, the then senior executive in charge of investment banking business, and Gao Jinni, the head of the kernel department, were both issued warning letters. Wind shows that Huachuang ** has a total of 9 sponsored projects this year, of which 3 were voluntarily withdrawn.
The regulator also requires Huachuang** to sort out the self-operated business, asset management business and subsidiary management, and assess the risks.
According to the data of Huachuang Yunxin's third quarterly report, Huachuang's self-operated business income in the first three quarters was 124.5 billion yuan, an increase of 107 percent year-on-year63%。The net fee income of asset management business was 6218420,000 yuan, down 9 percent year-on-year31%。
In terms of subsidiary management, Hua Chuang**, a holding subsidiary of Hua Chuang**, was ordered to correct by the Chongqing Securities Regulatory Bureau in July this year and recorded in the *** market integrity file.
According to the Chongqing Securities Regulatory Bureau, there are two violations in Huachuang's private asset management business: first, the deferred payment mechanism for the income of the main business personnel and relevant management personnel of the private asset management business is unreasonable, and the actual deferred payment ratio of individual personnel's income is less than 40%. Second, the relevant risk control measures of the private asset management business were not strictly implemented, such as whether the funds invested in the same asset by all the collective asset management plans managed by December 2022 were not effectively monitored before December 2022, and the relevant monitoring implemented after December 2022 did not leave a traceWhen a collective asset management plan manages a reverse repurchase of bonds, the pledge ratio of individual bonds exceeds the upper limit of the pledge ratio stipulated by the relevant internal systems of the company.
Which other brokerages have M&A expectations and what is the progress?
It is worth mentioning that under the expectation of mergers and acquisitions in the securities industry, Pacific ** and Huachuang Yunxin have risen sharply in July, October and November this year, and have gained multiple price limits. However, judging from the recent performance, the stock prices of both sides have **, as of December 22, the Pacific **December accumulation**316%, Huachuang Yunxin has a total of **713%。
At present, in addition to Pacific ** and Huachuang**, there are three groups of securities firms with potential mergers and acquisitions, namely Founder ** and Ping An **, Guolian ** and Minsheng **, Zheshang ** and Guodu **.
Among them, the China Securities Regulatory Commission previously required to submit a solution for Ping An of China to control the two securities firms at the same time by December 19. According to **, Ping An of China has submitted a relevant plan.
In terms of Guolian**, its controlling shareholder, Guolian Group, has been approved to become the largest shareholder of Minsheng**. According to the League of Nations, the specific integration of Minsheng ** still needs to be communicated with relevant parties, and the relevant work has not yet been carried out.
Zheshang has disclosed the acquisition of the national capital **191454%, but the transaction is still in the preliminary planning stage and is still uncertain.
Gao Chao, a non-bank analyst at Open Source, believes that under the regulatory guidance of intensive development (restricting equity financing), supporting the good and limiting the inferior, and encouraging the integration of mergers and acquisitions in the industry, the industry competition will intensify and the profit differentiation will increase, and the integration of mergers and acquisitions in the industry is expected to enter an accelerated period, and the main line of mergers and acquisitions may become an important main line opportunity for the brokerage sector in 2024.
Talking about the impact after the merger and acquisition, Kong Xiang, a non-bank analyst at Guoxin, said that in terms of financial performance, whether the merger and acquisition creates value depends on the payment of consideration and synergies (reflected in business share, cost advantages, etc.), but the synergies are difficult to evaluate. Overseas experience studies have shown that most mergers and acquisitions are difficult to create value due to excessive M&A bids, and the essence is that the payment is too high and the synergy effect is insufficient. Overall, M&A can improve the ROE and stock price growth of the acquirer in a short period of time, but the long-term effect is not obvious, and the synergistic effect of resource integration still needs to be explored.
For more information about the report, please contact the author of this article, Ma Jing, email: [email protected]) (China-Singapore Jingwei APP).
The views in this article are for reference only and do not constitute investment advice. )
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