On October 9, 2023, a significant development emerged in the merger and restructuring efforts between Guotai Junan Securities and Haitong Securities. The two companies made a joint announcement of their merger plan on both the Shanghai Stock Exchange and the Hong Kong Stock Exchange, with trading set to resume on October 10—eight trading days earlier than originally planned for the A-shares suspension period.
In their announcement, the companies emphasized their goal of establishing a strong partnership that leverages each other’s strengths for a mutually beneficial merger. Guotai Junan plans to absorb Haitong Securities through a share swap. Following the merger, the newly formed entity aims to strengthen its functional positioning, focusing on the development of a robust financial nation and promoting Shanghai as an international financial center. They aspire to align with global standards to enhance their competitiveness in the investment banking sector.
The share swap will occur at market prices, with consistent swap ratios for both A-shares and H-shares to ensure fair treatment for all shareholders. The exchange ratio is set at 0.62, meaning each share of Haitong Securities will be exchanged for 0.62 shares of Guotai Junan. This swap price will be determined using the average trading price of A-shares over the 60 trading days leading up to the announcement of the board resolution.
Additionally, Guotai Junan is committed to protecting minority shareholders’ interests, offering dissenting shareholders the option to request a buyout, as well as a cash alternative for dissenting Haitong Securities shareholders at the highest transaction prices over the same 60-day period.
Moreover, Guotai Junan plans to raise up to 10 billion yuan by issuing A-shares to its controlling shareholder, Shanghai State-owned Assets Management Co., Ltd. This shareholder will acquire shares at a net asset value per share, which is significantly higher than the share price prior to the suspension, and has pledged not to reduce their holdings for five years, demonstrating strong confidence in the company’s growth prospects.
According to the most recent data from the 2023 annual report, Guotai Junan and Haitong Securities together boast a retail customer base of approximately 35.93 million. They generate a net income of 1.6 billion yuan from seat leasing and have secured the largest number of IPO underwriting deals in the A-share market, with a total of 44. Their combined total assets and net assets amount to 1.6195 trillion yuan and 331.1 billion yuan, respectively, placing them at the forefront of the industry.
The merger is projected to create a top-tier investment bank with international competitiveness and market leadership. The newly formed company will prioritize its roles as a direct financing service provider, a guardian of the capital market, and a wealth manager, all while enhancing China’s global competitiveness and responding to customer needs to foster innovation in the capital market and the broader securities industry.
Post-merger, the company plans to bolster its capabilities in cross-border finance and comprehensive global financial services, establishing a presence in 17 countries and regions, including key capital markets like Shanghai, Hong Kong, Macau, Singapore, New York, London, Tokyo, and Mumbai. This strategy will encompass both developed markets in North America and Europe as well as emerging markets in Asia and Latin America.
