Dongwu Securities and Donghai Securities Strategic Integration Accelerating! Purchase Ratio Increased to 83.77%, What Signal Does It Release?

Everyday Financial Reporter | Chen Chen
Everyday Financial Editor | Peng Shui Ping

On the evening of March 13, Dongwu Securities announced a plan for issuing shares and paying cash to acquire assets and related-party transactions (hereinafter referred to as the “Plan”), revealing an intention to purchase 83.77% of Donghai Securities from 61 counterparties, including Changzhou Investment Group Co., Ltd. This purchase ratio represents a significant increase from the initial plan of 26.68% disclosed on the morning of March 2.

The transaction’s issuance price is set at 9.46 yuan per share, with a differentiated payment approach for different shareholders, combining “92% shares + 8% cash” and pure share payments. As the first case within the securities industry of resource integration between state-owned brokerages in different prefecture-level cities within the same province, this strategic consolidation aligns with policies encouraging brokerages to grow stronger during the 14th Five-Year Plan. If successfully completed, the actual controller of Donghai Securities will change from Changzhou Investment Group Co., Ltd. to Suzhou International Development Group Co., Ltd., with both parties achieving deep collaboration and complementarity in their respective core business areas.

From acquiring 26.68% to 83.77%, Dongwu Securities and Donghai Securities accelerate integration plans

The most notable aspect of this strategic integration between the two brokerages is the increase in the integration ratio. Looking back to the early morning of March 2, when Dongwu Securities first announced a suspension of trading due to major matters, it disclosed an intention to acquire 26.68% of Donghai Securities held by Changzhou Investment Group Co., Ltd. through share issuance, aiming for control of the target company. However, by the evening of March 13, this figure had risen sharply.

According to the latest “Plan” and a subsequent announcement by Donghai Securities on the same evening, on March 13, Dongwu Securities officially signed a “Framework Agreement for Share Issuance and Cash Payment to Purchase Assets” with Changzhou Investment Group Co., Ltd. and 59 other Donghai Securities shareholders. The agreement states that Dongwu Securities plans to acquire a total of 1.554 billion shares of Donghai Securities through share issuance and cash payment, representing 83.77% of Donghai Securities’ total share capital.

As of the signing date of this plan, Changzhou Investment Group Co., Ltd. held 26.6784% of Donghai Securities, making it the controlling shareholder and actual controller. After the transfer is completed, the actual controller of Donghai Securities will change from Changzhou Investment Group to Suzhou International Development Group. Notably, upon completion of this strategic integration, Changzhou Investment Group is expected to become a significant shareholder of Dongwu Securities, further optimizing its equity structure and strengthening strategic synergy.

According to reports, this strategic integration between Dongwu Securities and Donghai Securities is the first of its kind within the securities industry—resource integration between state-owned brokerages in different prefecture-level cities within the same province to grow stronger. Citic Securities has issued a research report stating that if this integration proceeds smoothly, Dongwu Securities’ asset-liability scale will expand significantly, and its brokerage network coverage and overall strength will be markedly enhanced. Currently, the total assets of securities firms within Jiangsu Province’s state-owned system exceed 1.5 trillion yuan. Under policies encouraging mergers, acquisitions, and the development of top-tier investment banks during the 14th Five-Year Plan, further integration and collaborative development of securities companies within Jiangsu warrant ongoing attention.

Price set at 9.46 yuan/share! 61 counterparties with two payment methods

The “Plan” further discloses the core transaction price and payment details to the market.

Regarding the most concerned issue of pricing, Dongwu Securities stated in the “Plan” that, after friendly negotiations among all parties, the final issuance price is set at the average trading price of the company’s stock over the 20 trading days prior to the pricing reference date, which is 9.46 yuan per share. Before the suspension of trading on March 2 due to the major matter planning, the latest closing price of Dongwu Securities was 9.29 yuan per share.

In terms of payment methods, Dongwu Securities did not adopt a single approach but designed two distinct payment forms for up to 61 counterparties.

The first form is a hybrid “shares + cash” payment: 32 counterparties, including Changzhou Investment Group Co., Ltd. and Shan Jinjin Capital Management Co., Ltd., will pay 92% of the transaction price via share issuance and 8% in cash. It is worth noting that these 32 counterparties, using the hybrid method, hold a total of 66.5% of Donghai Securities’ shares and are the core entities in this transaction plan.

The second form is pure share payment: for the remaining 29 counterparties holding a total of 17.28% of shares, Dongwu Securities will directly pay 100% of the transaction price through share issuance, with no cash involved.

However, regarding the final transaction price and plan, Dongwu Securities stated that once the audit and valuation of the target assets are fully completed, they will sign separate agreements with the counterparties. At that time, all parties will confirm the final transaction price and plan, which will be disclosed in the restructuring report.