The “Guojun + Haitong” reorganization plan has been finalized, and a trillion-level “aircraft carrier” securities firm is looming just around the corner

A widely watched, “aircraft carrier”-scale merger for the brokerage industry worth tens of trillions of yuan is drawing nearer.

On October 9, Guotai Junan and Haitong Securities both released merger and reorganization-related proposals and resumption announcements. The two companies’ shares are scheduled to resume trading on October 10, which is 8 trading days earlier than expected.

According to the latest announcements, this merger will be conducted via a stock-swap absorption merger in which Guotai Junan issues shares to absorb Haitong Securities. The stock-swap ratio between Haitong Securities and Guotai Junan is 1:0.62. For both A-shares and H-shares, the same stock-swap ratio will be adopted—i.e., 1 share of Haitong Securities’ A-share/H-share can be exchanged for 0.62 shares of Guotai Junan’s A-share/H-share.

After the merger is completed, Haitong Securities will terminate its listing and be deregistered as a legal entity. After the merger, the company will adopt a new company name.

With the smooth advancement of the merger and reorganization between these two leading brokerages, the capital market is also reacting to the news. On October 10, both Guotai Junan and Haitong Securities’ A-shares hit the daily trading limit upon resumption. By the close of that day, Guotai Junan was at 16.17 yuan, while Haitong Securities was at 9.65 yuan.

The reorganization plan is unveiled, and it will adopt a new company name

According to the merger transaction proposals released by Guotai Junan and Haitong Securities, this transaction will be a stock-swap absorption merger in which Guotai Junan absorbs Haitong Securities—namely, Guotai Junan will issue Guotai Junan A-share stock to all A-share exchange shareholders of Haitong Securities, and will issue Guotai Junan H-share stock to all H-share exchange shareholders of Haitong Securities.

After the merger is completed, Haitong Securities will terminate its listing and be deregistered as a legal entity. The A-share stock issued by Guotai Junan for this stock-swap absorption merger will be applied for listing and trading on the Shanghai Stock Exchange’s main board, and the H-share stock will be applied for listing and trading on the Hong Kong Stock Exchange’s main board. After the merger, the company will adopt a new company name.

In terms of pricing, this stock-swap absorption merger will use stock-swapping based on market prices, with the same stock-swap ratio planned for A-shares and H-shares. The A-share exchange price will be determined based on the average trading price of Guotai Junan A-share stock over the 60 trading days prior to the pricing benchmark date, adjusted for ex-rights and ex-dividends, and the exchange ratio for A-shares and H-shares will then be determined accordingly.

According to the announcement, Guotai Junan’s A-share exchange price is 13.83 yuan per share, Haitong Securities’ exchange price is 8.57 yuan per share, and the exchange ratio between Haitong Securities and Guotai Junan is 1:0.62. Based on this exchange ratio, Guotai Junan’s H-share exchange price is 7.73 Hong Kong dollars per share, while Haitong Securities’ H-share exchange price is 4.79 Hong Kong dollars per share.

In addition, based on this stock-swap absorption merger, Guotai Junan plans to issue no more than 10 billion yuan worth of A-share stock to its controlling shareholder, Shanghai State-Owned Assets Operation Co., Ltd., to raise supporting funds. The controlling shareholder will increase its stake in Guotai Junan through a targeted share increase at net asset value per share, which is higher than the share price before the trading suspension, and it commits not to reduce its holdings within 5 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 asset size reached 8980.6 billion yuan, and it has 37 securities branches and 345 securities outlets in the PRC, as well as 25 futures branches. Haitong Securities’ total asset size is 7214.15 billion yuan, and it has 29 securities branches and 311 securities outlets in the PRC, as well as 11 futures branches and 34 futures outlets. After the two companies merge, the continuing company’s total assets and net assets will be 16195 billion yuan and 3311 billion yuan, respectively, with both ranking first in the industry.

Regarding the impact of this transaction, Guotai Junan stated that the principal business of the continuing company will remain unchanged, while its core competitiveness will be significantly enhanced across multiple areas, including capital strength, customer base, service capabilities, and operational management.

Worth noting is that “Guotai Junan” was formed by the merger of the former Guotai Securities and the former Junan Securities. With this combination of Guotai Junan and Haitong Securities, how the merged company will be named has drawn keen attention from the market.

Tianyancha shows that on September 8, Guotai Junan applied to register more than 20 trademarks, including “Guotai Haitong,” “Haitong Guotai,” “Guotai Junan Haitong,” “Haitong Guotai Junan,” “Haitong Junan,” “Junan Haitong,” “Haitong Guojun’an,” and others. At present, all trademarks are in the status of “awaiting substantive review.”

The demonstration effect is highlighted, and it may accelerate brokerage M&A

Since the beginning of this year, policies supporting various types of mergers and reorganization have been rolled out frequently. In particular, since the issuance of “National Nine Provisions,” the CSRC has taken multiple measures to stimulate vitality in the M&A and reorganization market, and the activity level of M&A and reorganization among listed companies has been gradually increasing.

At the same time, regulators have clearly stated their support for leading brokerages to strengthen and optimize themselves through mergers and reorganizations. On September 24, the CSRC issued the “Opinions on Further Deepening Reform in the Market for Mergers and Reorganizations of Listed Companies,” which mentioned, among other things, that it will “support listed securities companies in improving core competitiveness through mergers and reorganizations and accelerate the building of first-class investment banks.”

As policy “warm winds” keep blowing, and after Guotai Junan’s absorption of Haitong Securities was officially launched, market expectations for consolidation and mergers in the securities sector have kept heating up. More and more M&A and reorganization cases have emerged, including “Guolian + Minsheng,” “Guoxin + Wanhe,” “Western + Guorong,” “Zheshang + Guodu,” “Huachuang + Taipingyang,” “Ping’an + Founder,” and others. There are cases where smaller brokerages band together for mutual support, and there are also cases where leading brokerages’ top players join forces in major consolidations.

Guojin Securities pointed out that the merger of Guotai Junan and Haitong Securities achieves breakthroughs in two dimensions: between leading brokerages and among listed brokerages. Compared with other cases, the difficulty of this merger is greater. With arrangements involving A/H valuation differences, stock-swap ratios, and other factors, it is expected to set an example for the industry and accelerate the pace of industry M&A, especially mergers between other leading listed brokerages.

Everbright Securities’ analysis said that Guotai Junan’s planned absorption of Haitong Securities also involves the merger of brokerages owned by local state-owned enterprises. In the future after the two companies combine, they will form a strong partnership, and the new company’s overall strength is expected to leap to the top among leaders in the brokerage industry, creating a “carrier-level” brokerage. Against the background of regulatory policy guidance to “cultivate first-class investment banks and investment institutions” and increasing divergence in profitability across the industry, brokerage mergers and consolidation are expected to enter an acceleration period.

It is also worth noting that, supported by policy tailwinds and market sentiment, the A-share market has recently seen a remarkable round of gains, and brokerage stocks—which have been dubbed “the banner bearer of a bull market”—have performed strongly.

Wind data shows that the brokerage index (886054.WI) rose 39% over the past month. Since September 10, the cumulative gains of Tianfeng Securities, CITIC Securities, Guohai Securities, Guoxin Securities, and China Merchants Securities have all exceeded 40%.