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China Fund News reporter Han Zhang

Jinlong Co., Ltd.'s transfer of equity in Dongguan Securities has seen new progress.

Recently, Dongguan Holdings announced that it plans to form a consortium with Dongguan Financial Holdings to jointly bid for a 20% stake in Dongguan Securities, with a reserve price of 2.272 billion yuan. Dongguan Holdings and Dongguan Financial Holdings intend to acquire 7.1% and 12.9% of Dongguan Securities' equity, respectively.

When the market opened this morning, Dongguan Holdings once rose by nearly 5%, and Jinlong Holdings once rose by nearly 3%.

The two major shareholders intend to jointly bid for 20% of the shares

On the evening of August 2, Dongguan Holdings issued the "Announcement on Participating in the Auction of Part of the Equity of Dongguan Securities". The announcement showed that Guangdong Jinlong Development Co., Ltd. (hereinafter referred to as Jinlong Co., Ltd.) transferred its 300 million shares of Dongguan Securities (accounting for 20% of the total share capital) through public listing.

In order to optimize the company's asset structure and deepen its future development strategy, Dongguan Development Holdings Co., Ltd. (Dongguan Holdings for short) intends to form a consortium with Dongguan Financial Holdings Group Co., Ltd. (Dongguan Financial Holdings for short) to jointly participate in the bidding for the aforementioned 20% equity interest in Dongguan Securities, of which the Company intends to acquire 106.5 million shares (accounting for 7.1% of the total share capital) and Dongguan Financial Holdings intends to acquire 193.5 million shares (accounting for 12.9% of the total share capital).

According to the announcement, the minimum price for the public listing transfer of 20% of Dongguan Securities' equity is 2.272 billion yuan, and the corresponding minimum price for Dongguan Holdings to acquire 7.1% of Dongguan Securities is 806 million yuan. The final transaction amount is subject to the actual auction results.

Dongguan Holdings stated in the announcement that the auction for Dongguan Securities’ equity is an open bidding. There is uncertainty as to whether the consortium formed by Dongguan Holdings can successfully delist. There is also uncertainty about the final auction results and subsequent approval matters.

The shareholder situation of Dongguan Securities shows that Jinlong Holdings holds a 40% stake, Dongguan Holdings and Dongguan Financial Holdings each hold 20% stakes, Dongguan Financial Holdings Capital holds 15.4% stakes, and New Century Science and Education holds 4.6% stakes.

According to the information disclosed in Dongguan Securities' prospectus, the three state-owned shareholders controlled by the Dongguan State-owned Assets Supervision and Administration Commission, Dongguan Holdings, Dongguan Financial Holdings and Dongguan Financial Holdings Capital, together hold 55.4% of the shares of Dongguan Securities.

If the bidding is successful and the approval and equity transfer procedures are completed smoothly, Dongguan Holdings' equity in Dongguan Securities will increase to 27.1%, while Dongguan Financial Holdings' equity in Dongguan Securities will increase to 32.9%, making it the largest shareholder of Dongguan Securities. Jinlong Holdings' equity in Dongguan Securities will drop from 40% to 20%.

Industry insiders believe that the joint bid by Dongguan Holdings and Dongguan Financial Holdings for 20% of Dongguan Securities' equity reflects the intention of local state-owned assets to integrate financial assets. This move may be aimed at strengthening local financial control through equity structure adjustment, while paving the way for Dongguan Securities' IPO. If Dongguan Financial Holdings becomes the largest shareholder, it may change Dongguan Securities' business strategy and development direction, and at the same time, attention should be paid to the stability of the company's governance structure after the equity transfer.

In March this year, Jinlong Co., Ltd. announced that Jinlong Co., Ltd. and Dongguan Jinkong Capital have reached a preliminary intention regarding Dongguan Jinkong Capital's intention to acquire 300 million shares of Dongguan Securities (accounting for 20% of the company's total share capital). In early June, Jinlong Co., Ltd. disclosed in its report on the progress of the above-mentioned major asset restructuring that "the company's proposed transfer of its shares in Dongguan Securities is still in the process of ongoing advancement." At the end of July, the board of directors of Jinlong Co., Ltd. agreed to formally list the transfer publicly, with a minimum listing price of 2.272 billion yuan. It is worth noting that Jinlong Co., Ltd. is also pre-listing the proposed transfer of its 67.78% stake in Zhongshan Securities. ‍ ‍ ‍ ‍

Applications for public offerings were accepted within the year

IPO review resumed

Public information shows that Dongguan Securities was established in June 1988 with a registered capital of 1.5 billion yuan. Over the past 30 years, Dongguan Securities has been focusing on brokerage, asset management, investment banking, and proprietary trading, and has actively developed private equity funds, alternative investment and other businesses, becoming a national comprehensive securities company.

Not long ago, Dongguan Securities' IPO ushered in a turnaround. On the evening of July 1, Jinlong Co., Ltd. announced that Dongguan Securities' IPO has resumed review. Dongguan Securities began to apply for IPO in 2015. In February 2022, Dongguan Securities' first IPO was approved, but it has not yet received the listing approval. In 2023, the full registration system was implemented, and Dongguan Securities' IPO was accepted. Since March 31 this year, the IPO review of Dongguan Securities has been suspended.

According to the balance sheet and income statement (unaudited) of Dongguan Securities in the first half of 2024 disclosed by Jinlong Holdings, Dongguan Securities achieved a total operating income of 1.026 billion yuan and a net profit of 298 million yuan in the first half of the year. In contrast, in the same period of 2023, Dongguan Securities achieved an operating income of 1.094 billion yuan and a net profit of 367 million yuan, which was an overall decline.

In addition, Dongguan Securities has also focused on developing public offering business. In April this year, the application materials submitted by Dongguan Securities for the establishment of a public offering fund management company were accepted by the China Securities Regulatory Commission. It also became the second securities company to apply for the establishment of a public offering fund company this year after Wanlian Securities.

Since the beginning of this year, Dongguan Securities has seen a number of senior management changes. On May 8, Dongguan Securities announced that President Pan Haibiao resigned due to work transfer, and Party Secretary and Chairman Chen Zhaoxing will perform the duties of President on his behalf. On May 20, Dongguan Securities announced that the company appointed Luo Yifen as Chief Financial Officer and Secretary of the Board of Directors, and appointed Zhang Yichao as Assistant to the President; in addition, due to work adjustments, Guo Xiaojun will no longer serve as Compliance Director and Chief Legal Officer; Gao Zemin will no longer serve as Vice President, and will no longer perform the duties of Chief Financial Officer and Secretary of the Board of Directors. On June 12, Dongguan State-owned Assets System issued an announcement to recruit 8 talents in China, including the General Manager of Dongguan Securities.

Editor: Captain

Review: Muyu

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