The deal comes as China’s central government, eager to build globally competitive investment banks and asset managers, encourages consolidation in the country’s US$1.7 trillion brokerage industry.
Orient Securities said on Sunday that it would use cash and newly issued shares to acquire 100 percent of Shanghai Securities, but did not give a value for the deal.
Both Shanghai-based firms are controlled by companies that manage state assets for the Shanghai government.
Total assets of the combined entity are expected to exceed 600 billion yuan, making Orient Securities a top 10 brokerage in China, Shanghai Securities News reported.
Orient Securities’ Hong Kong shares jumped as much as 13.5 percent before paring most of those gains to be up just 0.8 percent in morning trade.
Beijing has dialled up rhetoric about the need for reform in the brokerage sector, with new directives to encourage mergers and acquisitions as well as restructuring in an industry in which more than 140 Chinese and foreign players compete.
Shanghai-based brokerage Guotai Junan acquired Haitong Securities last year, creating Guotai Haitong, China’s largest brokerage by assets at the time before it was later outranked by Citic Securities. (Reuters)
