China International Capital Corp. Ltd. (CICC) plans to acquire two smaller sibling brokerages, Dongxing Securities Co. Ltd. and Cinda Securities Co. Ltd., in a major shake-up of China’s fragmented brokerage industry, reports Caixin. In separate statements issued Wednesday evening, the three companies said CICC would absorb Dongxing and Cinda through a share-swap transaction. Trading in all three companies, listed in Shanghai with CICC also listed in Hong Kong, has been suspended and is expected to remain halted for up to 25 trading days, reflecting the complexity of the deal.
The deal will create China’s fourth-largest brokerage by total assets, with RMB 1.01 trillion ($142 billion) in assets and about RMB 171.5 billion in net assets, trailing only Citic Securities Co. Ltd., Guotai Haitong Securities Co. Ltd., and Huatai Securities Co. Ltd.
The tie-up marks a significant advance in Beijing’s effort to streamline the country’s overpopulated securities sector and foster globally competitive investment banks. All three firms are controlled by Central Huijin Investment Ltd., a unit of China Investment Corp., the nation’s sovereign wealth fund. In June, Central Huijin added Dongxing and Cinda to its portfolio, which already included CICC, China Galaxy Securities Co. Ltd., and Shenwan Hongyuan Group Co. Ltd.