CICC Buys China Investment Securities For $2.5B

By Czarina Ara Lasco

Nov 05, 2016 05:28 AM EDT

Two credible sources knowledgeable about the said deal told Reuters on Friday that CICC entered into several talks to purchase the state-backed securities company which could be considered as its biggest procurement and a first since listing back in November 2015.

The announcement of the planned procurement was pending due to the company's suspension on Friday. The Hong Kong-listed shares of CICC will resume its trade on Monday.

In its filing to the Hong Kong stock exchange, CICC said: "The proposed acquisition will enhance the overall competitiveness of the wealth management business of the enlarged group and further promote the development of other businesses, including the investment banking business."

According to the statement released by CICC, the unlisted China Investment Securities had assets of 96.6 billion yuan. In 2015, its revenue and other income summed up to 12.48 billion yuan. It is a hundred percent owned by Central Huijin.

The sources, who kept their identities since the talks in the said acquisition are confidential, said that the negotiations between CICC and China Investment Securities have been on-going for a couple of months already.

As seen by analysts, the deal, as complementary for the two companies, will provide investment banking-focused CICC the ways to increase its retail business in a country where regular exchange by investors has improved returns at brokerages.

CICC, being the oldest investment bank in China, has contributed a big part in assisting several huge Chinese state-owned enterprises list in Hong Kong which includes the $21.9 billion initial public offering of Industrial and Commercial Bank of China (1398.HK) (601398.SS) in 2006 and the $22 billion listing of Agricultural Bank of China (1288.HK)(601288.SS) in 2010.

Hong Hao, BOCOM International chief strategist, said that the agreement would benefit both CICC and China Investment Securities.

He said, "CICC lacks a strong footprint in retail business, which is the expertise of China Investment Securities".

According to CICC and China Investment Securities' company websites, Shenzhen-based China Investment Securities operates about 200 retail branches across China compared with the 20 retail branches of CICC.

China International Capital Corporation Limited is one of China's leading investment banking firms that engages in investment banking, securities, investment management, and other financial services primarily with institutional clients.

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