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

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

On October 9, Guotai Junan and Haitong Securities simultaneously announced merger and restructuring plans and resumption notices, with both companies’ stocks scheduled to resume trading on October 10, eight trading days earlier than initially expected.

According to the latest announcement, this merger will involve Guotai Junan absorbing Haitong Securities through a share swap, with a swap ratio of 1:0.62 between Haitong Securities and Guotai Junan. The same swap ratio will be applied to both A-shares and H-shares, meaning that 1 share of Haitong Securities A/H stock can be exchanged for 0.62 shares of Guotai Junan A stock.

Upon completion of the merger, Haitong Securities will terminate its listing and cancel its legal entity status. The merged company will adopt a new corporate name.

As the merger and restructuring of the two leading brokerages proceed smoothly, the capital market is also reacting. On October 10, both Guotai Junan and Haitong Securities A-shares hit the daily limit-up. By the close of trading, Guotai Junan was priced at 16.17 yuan, and Haitong Securities at 9.65 yuan.

Restructuring plan unveiled, a new company name will be adopted

According to the merger transaction plan issued by Guotai Junan and Haitong Securities, the transaction will involve Guotai Junan issuing A-shares to all A-share shareholders of Haitong Securities and H-shares to all H-share shareholders of Haitong Securities in exchange for their shares.

After the merger, Haitong Securities will cease to be listed and will cancel its legal entity status. The A-shares issued by Guotai Junan due to this share swap will be applied for listing and trading on the Shanghai Stock Exchange, while the H-shares will be listed and traded on the Hong Kong Stock Exchange. The new company will adopt a new name.

In terms of pricing, this share swap merger will use market prices for the exchange, with the same swap ratio for A-shares and H-shares. The A-share swap price for both companies will be determined based on the average trading price of A-shares over the 60 trading days prior to the pricing date, adjusted for dividends and rights issues, which will then determine the swap ratios for A-shares and H-shares.

According to the announcement, the A-share swap price for Guotai Junan is 13.83 yuan per share, and for Haitong Securities it is 8.57 yuan per share, resulting in a swap ratio of 1:0.62. Based on this ratio, the H-share swap price for Guotai Junan is 7.73 HKD per share, and for Haitong Securities it is 4.79 HKD per share.

Furthermore, based on this share swap merger, Guotai Junan plans to issue up to 10 billion yuan of A-shares to raise supporting funds from its controlling shareholder, Shanghai State-owned Assets Management Co., Ltd. The controlling shareholder will increase its holdings of Guotai Junan shares at a price higher than the pre-suspension stock price and has committed not to reduce its holdings within five years.

Guotai Junan and Haitong Securities are both 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 business departments, and 25 futures branches domestically. Haitong Securities’ total assets amounted to 721.415 billion yuan, with 29 securities branches, 311 securities business departments, 11 futures branches, and 34 futures business departments. After the merger, the surviving company’s total assets and net assets will be 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, while its core competitiveness will be significantly enhanced in terms of capital strength, customer base, service capabilities, and operational management.

It is noteworthy that “Guotai Junan” was formed by the merger of the former Guotai Securities and the former Junan Securities. The strong alliance between Guotai Junan and Haitong Securities has attracted market attention regarding how the merged company will be named.

Tianyancha shows that Guotai Junan applied to register over 20 trademarks on September 8, including “Guotai Haitong,” “Haitong Guotai,” “Guotai Junan Haitong,” “Haitong Guotai Junan,” “Haitong Junan,” “Junan Haitong,” and “Haitong Guojun.” Currently, all trademarks are “waiting for substantive examination.”

Demonstration effect highlighted, potentially accelerating M&A in the brokerage industry

Since the start of this year, various policies supporting mergers and acquisitions have been introduced intensively. Especially after the “Nine Policies” were issued, the China Securities Regulatory Commission (CSRC) has taken multiple measures to stimulate market activity, and the activity of listed companies in M&A has gradually increased.

Meanwhile, regulators have explicitly supported leading brokerages in strengthening through mergers and acquisitions. On September 24, the CSRC released the “Opinions on Deepening the Reform of the Listed Companies M&A Market,” which states, “Support listed securities firms to enhance their core competitiveness through mergers and acquisitions, and accelerate the building of first-class investment banks.”

With the policy “favorable winds” blowing and the official launch of Guotai Junan’s absorption of Haitong Securities, market expectations for industry consolidation have continued to rise. Numerous M&A cases have emerged, including “Guolian + Minsheng,” “Guoxin + Wanhua,” “Western + Guorong,” “Zhejiang Merchants + Guodu,” “Huachuang + Pacific,” “Ping An + Founder,” among others, involving both small and medium-sized brokerages banding together and leading brokerages forming alliances.

Guojin Securities noted that the merger of Guotai Junan and Haitong Securities marks a breakthrough in both leading brokerage mergers and listed brokerage M&A, which is more challenging than usual. The arrangements regarding valuation differences between A-shares and H-shares and swap ratios are expected to serve as industry benchmarks and accelerate the M&A process, especially among other top-tier listed brokerages.

Everbright Securities analyzed that Guotai Junan’s proposed absorption of Haitong Securities is also a merger of local state-owned capital brokerages. After the merger, the combined entity is expected to achieve a strong partnership, with the new company’s comprehensive strength likely to rise to the top of the industry, creating a “carrier-level” brokerage. Under the guidance of regulatory policies to “cultivate first-class investment banks and investment institutions” and amid industry profit differentiation, securities industry M&A and consolidation are expected to accelerate.

It is also noteworthy that, supported by favorable policies and market sentiment, recent A-share markets have experienced a remarkable rally, with brokerage stocks—often called the “flag bearers” of the bull market—performing strongly.

Wind data shows that the securities index (886054.WI) has increased by 39% over the past month, with Tianfeng Securities, CITIC Securities, Guohai Securities, Guoxin Securities, and China Merchants Securities all gaining over 40% since September 10.