Chinese brokerage CICC announces share swap merger details with Dongxing and Cinda

China International Capital Corporation (CICC) has unveiled details of its merger with two smaller state-owned rivals that will create an entity with combined assets of more than 900 billion yuan (US$127.8 billion).\nThe Beijing-based investment bank will issue some 3.1 billion new A shares at 36.91 yuan to acquire all outstanding shares in Dongxing Securities and Cinda Securities to facilitate the merger, according to a filing to the Hong Kong stock exchange on Wednesday.\nShares of CICC rose 3.7 per cent to 36.18 yuan after trading resumed on Thursday. Trading in the three companies was suspended on November 19 pending the announcement.\nThe merger would “significantly strengthen support for national strategies and the real economy”, CICC said, adding that the merger also reflected a trend in China’s securities industry where firms were “optimising resource allocation through integration”.\n\nThe transaction will create China’s fourth-largest investment bank with assets of about 930 billion yuan, and follows last year’s combination of Guotai Junan Securities and Haitong Securities, which created an industry giant with 1.68 trillion yuan in assets.\nThe consolidations align with Beijing’s push to build global financial champions.\nIn a speech this month to the Securities Association of China, Wu Qing, the chairman of the China Securities Regulatory Commission, said brokerages should “redouble efforts to fulfil the goal set by Beijing to build China into a global financial powerhouse” while supporting the country’s technology self-reliance strategy.\nUnder the agreement, each Dongxing A-share will be converted into 0.4373 CICC shares, while each Cinda share will be exchanged for 0.5188 CICC shares. CICC, Dongxing and Cinda are controlled by Central Huijin Investment, a unit of China’s sovereign wealth fund.\nCinda shareholders will receive 19.15 yuan per share, matching the 20-day average price and implying no premium, while Dongxing shareholders are being offered a 26 per cent premium above the 20-day average of 12.81 yuan before the merger announcement.\nQualified CICC dissenting shareholders can sell their A shares at 34.80 yuan each and H shares at HK$18.86 each.\nDongxing’s dissenting shareholders can sell at 13.13 yuan per share, while Cinda’s dissenting shareholders have a put option at 17.79 yuan per share.\nUpon completion of the deal, Central Huijin’s stake in CICC will fall from 40.11 per cent to 24.44 per cent. It pledged not to sell CICC shares for 36 months after the completion of the merger.\nCICC was founded in 1995 as a joint venture backed by China Construction Bank and Morgan Stanley. China Construction Bank transferred its equity interest to China Jianyin Investment, which later transferred it to Central Huijin. Morgan Stanley sold its stake in 2010.\nThe firm went public in Hong Kong in November 2015, followed by a listing in Shanghai in November 2020.\nIt operates more than 200 branches and offices on the mainland, Hong Kong, New York, London, Singapore, Frankfurt, Tokyo, Dubai and elsewhere.\n