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[Introduction] Guosen Securities intends to purchase the controlling rights of Wanhe Securities, and the stock will be suspended from tomorrow's market opening

China Fund News reporter Chen Xi

The wave of brokerage mergers and acquisitions is surging, and another leading brokerage firm has taken action!

On the evening of August 21, Guosen Securities issued a "Suspension Announcement on Planning to Issue Shares to Purchase Assets", intending to purchase controlling rights of Wanhe Securities by issuing A-shares.

It is reported that Guosen Securities has signed a "Letter of Intent for Cooperation" with Shenzhen Capital Operation Group, the controlling shareholder of Wanhe Securities, and plans to purchase 53.0892% of the equity of Wanhe Securities held by Shenzhen Capital Operation Group by issuing shares.

See the details——

Guosen Securities takes action

Plans to purchase controlling stake in Wanhe Securities

According to the disclosure, the target of Guosen Securities' planned issuance of shares to purchase assets is Wanhe Securities. Guosen Securities said that the transaction is still in the planning stage and the company is currently in contact with the shareholders of the target company. The preliminary counterparty of the issuance of shares to purchase assets is Shenzhen Capital Operation Group Co., Ltd., which holds 53.0892% of the total share capital of Wanhe Securities and is the controlling shareholder of Wanhe Securities.

On August 21, Guosen Securities and Shenzhen Capital Operation Group Co., Ltd. signed a "Cooperation Intention Agreement". Guosen Securities intends to purchase 53.0892% of the shares of Wanhe Securities held by Shenzhen Capital Operation Group Co., Ltd. by issuing shares. Both parties to the transaction agreed to actively provide the other party with necessary cooperation, fully promote this reorganization, and complete the signing of the relevant formal transaction agreement.

Guosen Securities said that the transaction intentions of the remaining shareholders have not yet been finalized, and the final transaction counterparty and acquisition ratio for issuing shares to purchase assets will be based on the information disclosed in the restructuring plan or restructuring report announced subsequently.

Guosen Securities reminded in the announcement: The company is planning to issue shares to purchase assets, and there is still great uncertainty. Investors are advised to pay attention to investment risks.

At the same time, due to the uncertainty of the relevant matters, in order to safeguard the interests of investors and avoid major impact on securities transactions, according to the relevant regulations of the Shenzhen Stock Exchange, Guosen Securities A shares will be suspended from trading from the opening of the market on August 22, 2024. Guosen Securities expects to disclose the transaction plan within no more than 10 trading days.

The equity structure is relatively clear

Industry ranking in the middle and lower levels

Public information shows that Wanhe Securities was established in January 2002 by Shenzhen Finance and Financial Services Center, Haikou Finance Office Supplies Service Company and Chengdu Caisheng Asset Management Center, and its registered place is Haikou City, Hainan Province. In July 2016, Wanhe Securities completed its shareholding reform and changed to Wanhe Securities Co., Ltd.

According to the official introduction, Wanhe Securities insists on becoming a high-quality service provider for capital operations of small and medium-sized technological innovation enterprises and a service provider of characteristic asset management services in the Greater Bay Area, taking the path of differentiated and characteristic high-quality development to build a small and medium-sized boutique securities firm. By the end of 2023, Wanhe Securities has a total of 27 branches, 25 business departments, and 2 subsidiaries.

Overall, the equity structure of Wanhe Securities is relatively clear. In addition to Shenzhen Capital Operation Group Co., Ltd. holding 53.09% of Wanhe Securities, the second largest shareholder of Wanhe Securities is Shenzhen Kunpeng Equity Investment Co., Ltd., with a shareholding ratio of 24%; the third largest shareholder, Shenzhen Industry Group, holds 7.58% of Wanhe Securities. The actual controllers of the top three shareholders are all Shenzhen State-owned Assets Supervision and Administration Commission, and the remaining shareholders hold less than 5% of the shares.

In terms of assets, at the end of 2023, Wanhe Securities' total assets were 13.162 billion yuan, net assets were 5.462 billion yuan, and net capital was 4.788 billion yuan. In 2023, Wanhe Securities (consolidated income statement) achieved operating income of 499 million yuan and net profit of 59 million yuan.

According to the preliminary statistical ranking of 145 securities companies in 2023 by the China Securities Association, in 2023, Wanhe Securities ranked 85th in the industry in total assets, 84th in net assets, 84th in net capital, 100th in operating income, and 99th in net profit.

Guosen Securities is a well-known leading securities firm in the industry, and its actual controller is also the Shenzhen State-owned Assets Supervision and Administration Commission. As of the end of 2023, Guosen Securities' total assets were 462.96 billion yuan and its net assets were 110.46 billion yuan. In 2023, Guosen Securities achieved operating income of 17.317 billion yuan and net profit of 6.427 billion yuan, and its various operating indicators were at the forefront of the industry.

As of the close of August 21, the share price of Guosen Securities was 9.04 yuan per share, with a total market value of 86.9 billion yuan.

The wave of mergers and acquisitions in the securities industry is surging

Support leading institutions to become better and stronger

Since the 1990s, the domestic securities industry has experienced four waves of mergers and acquisitions: separate business operations, comprehensive governance, "one participation and one control", and market-oriented mergers and acquisitions. Industry veterans pointed out that overall, mergers and acquisitions between securities companies are aimed at expanding their territory, enhancing their strength, and becoming stronger and better. Mergers and acquisitions further increase the concentration of the industry, and differentiated and diversified operations have become the inevitable choice for securities companies to create competitive advantages.

In October last year, the Central Financial Work Conference first proposed "cultivating first-class investment banks and investment institutions". In March this year, the China Securities Regulatory Commission issued the "Opinions on Strengthening the Supervision of Securities Companies and Public Funds to Accelerate the Construction of First-Class Investment Banks and Investment Institutions (Trial)". It mentioned that it would promote the formation of about 10 high-quality leading institutions to lead the high-quality development of the industry, and support leading institutions to become better and stronger through mergers and acquisitions, restructuring, organizational innovation and other means.

Guided by policies, the securities industry has ushered in the fifth wave of mergers and acquisitions. Before Guosen Securities announced the acquisition of Wanhe Securities, mergers and acquisitions such as "Ping An + Founder", "Pacific + Huachuang", "Guolian + Minsheng", "Zheshang + Guodu", and "Western + Guorong" were also in progress. Who will be the winner of the first successful merger and acquisition case after the Central Financial Work Conference has become the focus of market attention.

Huaxi Securities' non-bank financial team pointed out that mergers and acquisitions are an important means for securities companies to grow bigger and stronger through external expansion. Through the optimal allocation of resources, securities companies can quickly expand their capital scale and business scope, enhance their comprehensive strength, better cope with the increasingly fierce industry competition, and move towards the goal of building first-class investment banks and investment institutions. Overall, mergers and acquisitions can increase industry concentration and are conducive to the high-quality development of the securities industry.