"Guojun + Haitong" restructuring plan finalized, trillion-level "aircraft carrier" brokerage is about to emerge

The highly anticipated trillion-level “aircraft carrier” of the securities industry is gradually approaching.

On October 9, Guotai Junan Securities and Haitong Securities simultaneously announced their merger plans and resumption of trading notices. Both companies’ stocks are scheduled to resume trading on October 10, eight trading days earlier than expected.

According to the latest announcement, the merger will be conducted through Guotai Junan Securities’ share swap to absorb Haitong Securities. The exchange ratio is 1:0.62, with the same ratio applied to A-shares and H-shares, meaning 1 share of Haitong Securities’ A-shares/H-shares can be exchanged for 0.62 shares of Guotai Junan Securities’ A-shares/H-shares.

After the merger, Haitong Securities will delist and cancel its corporate legal status. The combined company will adopt a new name.

As the two leading securities firms smoothly proceed with the merger, the capital market is also responding. On October 10, both Guotai Junan and Haitong Securities’ A-shares hit the daily limit up. By the close, Guotai Junan was trading at 16.17 yuan, and Haitong Securities at 9.65 yuan.

Merger Plan Announced, New Company Name to Be Adopted

According to the merger transaction plan released by Guotai Junan Securities and Haitong Securities, the transaction will be carried out through Guotai Junan Securities’ share swap to absorb Haitong Securities. Guotai Junan will issue Guotai Junan A-shares to all Haitong Securities A-share shareholders and Guotai Junan H-shares to all Haitong Securities H-share shareholders.

After the merger, Haitong Securities will delist and cancel its legal entity. The A-shares issued by Guotai Junan as part of this share swap will be listed and traded on the main board of the Shanghai Stock Exchange, and the H-shares will be listed on the main board of the Hong Kong Stock Exchange. The new company will adopt a new name.

Regarding pricing, the share swap will be based on market prices, with the same exchange ratio for A-shares and H-shares. The A-share exchange price is determined by the average trading price of Guotai Junan A-shares over the 60 trading days prior to the pricing date, adjusted for dividends and rights issues, which then determines the exchange ratios for both A-shares and H-shares.

The announcement states that Guotai Junan’s A-share exchange price is 13.83 yuan per share, Haitong Securities’ exchange price is 8.57 yuan per share, with an exchange ratio of 1:0.62. Based on this ratio, the H-share exchange prices are 7.73 HKD per share for Guotai Junan and 4.79 HKD per share for Haitong Securities.

Additionally, based on this share swap, Guotai Junan plans to issue no more than 10 billion yuan in A-shares to its controlling shareholder, Shanghai State-owned Assets Operation Co., Ltd., to raise supporting funds. The controlling shareholder will purchase Guotai Junan shares at a price above the pre-suspension stock price, with a commitment not to reduce holdings within five years.

Both Guotai Junan and Haitong Securities are financial institutions under Shanghai state-owned assets. As of the end of June 2024, Guotai Junan’s total assets reached 898.06 billion yuan, with 37 securities branches, 345 securities sales offices, and 25 futures branches domestically. Haitong Securities’ total assets amounted to 721.415 billion yuan, with 29 securities branches, 311 securities sales offices, 11 futures branches, and 34 futures sales offices domestically. After the merger, the combined company’s total assets and net assets will be approximately 1.6195 trillion yuan and 331.1 billion yuan, respectively, ranking first in the industry.

Regarding the impact of this transaction, Guotai Junan stated that the core business of the surviving company will remain unchanged, with significant enhancements in capital strength, client base, service capabilities, and operational management, thereby strengthening its core competitiveness.

It is worth noting that “Guotai Junan” was formed from the merger of Guotai Securities and Junan Securities. The market is highly attentive to how the newly merged company will be named following the strong alliance between Guotai Junan and Haitong Securities.

Tianyancha shows that Guotai Junan applied to register over 20 trademarks on September 8, including names such as “Guotai Haitong,” “Haitong Guotai,” “Guotai Junan Haitong,” “Haitong Guotai Junan,” “Haitong Junan,” “Junan Haitong,” “Haitong GuoJun,” etc. All trademarks are currently “awaiting substantive examination.”

Demonstration Effect Emerges, Potentially Accelerating M&A in the Securities Industry

Since the beginning of this year, various policies supporting mergers and acquisitions have been intensively introduced. Especially after the issuance of the “Nine Articles” policy, the China Securities Regulatory Commission (CSRC) has taken multiple measures to stimulate the M&A market, leading to a gradual increase in the activity of listed companies’ mergers and acquisitions.

Meanwhile, regulators have explicitly supported leading securities firms to strengthen through M&A. On September 24, the CSRC issued the “Opinions on Deepening Market Reform of Listed Company Mergers and Acquisitions,” which states, “Support listed securities companies to enhance core competitiveness through M&A and accelerate the building of first-class investment banks.”

With policies becoming more favorable and the official start of Guotai Junan’s absorption of Haitong Securities, market expectations for industry consolidation are rising. Numerous M&A cases have emerged, including “Guolian + Minsheng,” “Guoxin + Wanhua,” “Western + Guorong,” “Zheshang + Guodu,” “Huachuang + Pacific,” “Ping An + Founder,” among others. These involve both smaller firms banding together and leading firms forming alliances.

Guojin Securities pointed out that the merger of Guotai Junan and Haitong Securities represents a breakthrough in both leading securities firms and listed securities firms’ M&A. Compared to other mergers, it faces greater challenges, especially regarding valuation differences between A-shares and H-shares and share swap arrangements. The case is expected to set an industry example and accelerate the M&A process, particularly among other top listed securities firms.

Everbright Securities analyzed that this merger, like other local state-owned securities mergers, will create a strong combined entity. The new company is expected to leap to the forefront of the securities industry, becoming a “carrier-level” securities firm. Under the guidance of regulatory policies aimed at cultivating top-tier investment banks and increasing industry profitability, securities industry M&A and consolidation are likely to accelerate.

Notably, under the influence of favorable policies and market sentiment, recent A-share markets have experienced a notable rally, with securities stocks, known as “bull market leaders,” performing strongly.

Wind data shows that the securities index (886054.WI) has increased by 39% over the past month. From September 10 to now, stocks like Tianfeng Securities, CITIC Securities, Guohai Securities, Guosen Securities, and China Merchants Securities have all gained over 40%.