CITIC Securities Said to Sell 45% of China Securities

Beijing State-owned Assets Operation Co., Ltd. has gained approval from the municipal government of Beijing to take a 45 percent stake in China Securities Co., Ltd for CNY 7 billion to CNY 8 billion, sources said on January 14.

The acquisition plan has been basically finalized and the other 55 percent stake in the target will be jointly controlled by CITIC Securities Co., Ltd. (SHSE: 600030) and China Jianyin Investment Ltd. The State-owned Assets Supervision and Administration Commission (SASAC) of Beijing, parent of Beijing State-owned Assets Operation, will become the biggest single shareholder of China Securities, but has no absolute holding controlling right.

The 45 percent stake should be from CITIC Securities, forecasted industry observers, and after the deal, the stake it owns in China Securities will be 15 percent. Beijing State-owned Assets Operation was established as an asset consolidation platform of the SASAC of Beijing at the start of 2009 and Yin Rongyan, vice president of China Securities, acts as its general manager.

A financial institution in China is allowed to buy into at most two securities brokers and the stake it controls in one of them should be a majority part and that in another should be a minority part in line with a notice the China Securities Regulatory Commission (CSRC), the top Chinese securities regulator, released in March 2008. Except China SAFE Investments Ltd., others financial institutions that could not meet the standards should submit related consolidation plans before December 31, 2009 and complete the consolidation before December 31, 2010.

CITIC Securities is one of them because it has a stake in three securities brokers simultaneously. It controlled a 100 percent stake in CITIC-Kington Securities Co., Ltd., a 91.4 percent stake in CITIC Wantong Securities Co., Ltd. and a 60 percent stake in China Securities as at June 30, 3009.

China Securities was established on the base of the former Huaxia Securities Co., Ltd. with a registered capital of CNY 2.7 billion and CITIC Securities takes a 60 percent stake in it with an investment of CNY 1.62 billion. The net profit China Securities gained in the first half of 2009 reached CNY 1.18 billion in accordance with unaudited half-yearly financial results the broker released on the chinamoney.com. The part attributable to CITIC Securities is CNY 707 million, accounting for 18.47 percent of CNY 3.83 billion net profit attributable to shareholders CITIC Securities captured in the six months. The proportion will drop to a large extent after the aforesaid deal. In addition, CITIC Securities' outlets will fall by about 50 percent.

China Securities' net assets hit CNY 5.79 billon as at the end of June 2009.

(USD 1 = CNY 6.83)

Source: www.nbd.com.cn (January 15, 2010)

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