New M&A Era: Guotai Junan Merges with Haitong Securities

According to the data from the 2024 semi-annual report, the new institution formed by the merger ranks second in the industry in terms of revenue and net profit, while its asset size, number of employees, and revenue from various business segments are at the forefront of the industry.

On the evening of September 5th, Guotai Junan announced that it is planning to merge with Haitong Securities through a share-for-share absorption and issue A-shares to raise supporting funds.

The news immediately attracted market attention.

The merger of the two is a significant event with symbolic significance for China's capital market and the securities industry, which also means that the integration of leading securities firms has begun.

This year, there have been multiple mergers and acquisitions cases in the securities market, but the protagonists have all been small and medium-sized securities firms.

The merger between Guotai Junan and Haitong Securities is a strong alliance and is the first case of merger and reorganization of leading securities firms since the implementation of the new "Nine Articles".

It is also the largest A+H dual market absorption and merger and the largest integration case of A+H listed securities firms in the history of China's capital market, involving multiple business licenses and several domestic and foreign listed subsidiaries.

According to the data from the 2024 semi-annual report, the new institution formed by the merger ranks second in the industry in terms of revenue and net profit, while its asset size, number of employees, and revenue from various business segments are at the forefront of the industry.

"This integration of Guotai Junan and Haitong is the first case of merger and reorganization of leading securities firms, which further opens up the imagination space for the improvement of the concentration of the securities industry, and the advantages of leading securities firms may be accelerated.

In combination with relevant policy goals, mergers and reorganizations between leading securities firms will be an important way to build a securities industry with international competitiveness," said Hu Xiang, a non-bank analyst at Dongwu Securities.

However, the merger of the two also faces the challenge of integrating various businesses.

Both Guotai Junan and Haitong Securities are comprehensive securities firms with a wide range of businesses, and there is an overlap in many business licenses.

How to better integrate later is also a challenge faced by the "strong alliance".

The speculation that Guotai Junan will merge with Haitong Securities is becoming a reality.

On the evening of September 5th, Guotai Junan and Haitong Securities both issued suspension announcements, planning major asset reorganizations, and the stocks will be suspended from September 6th.

Guotai Junan announced that the company is planning to merge with Haitong Securities through the issuance of A-shares to all A-share shareholders of Haitong Securities and the issuance of H-shares to all H-share shareholders of Haitong Securities, and issue A-shares to raise supporting funds.

Guotai Junan and Haitong Securities also announced at the same time that A-shares will be suspended from the opening of the market on September 6, 2024 (Friday), and according to the relevant regulations of the Shanghai Stock Exchange, the suspension period is expected to not exceed 25 trading days.

Guotai Junan stated that this reorganization is conducive to building a first-class investment bank and promoting high-quality development of the industry.

The merger of the two may not be without a trace.

In June this year, Chen Jining, the Party Secretary of Shanghai, inspected Guotai Junan Securities and demanded to accelerate the progress towards an investment bank with international competitiveness and market influence.

Guotai Junan stated in the semi-annual report that the China Securities Regulatory Commission proposed to "form 2-3 investment banks and investment institutions with international competitiveness and market leadership by 2035", supporting leading institutions to enhance core competitiveness through mergers and reorganizations, organizational innovation, and other means, and pointed out the development direction for leading securities firms to do well and strong, and to accelerate the construction of a first-class investment bank.

It is worth noting that the two securities firms that have long been in the first echelon of the securities industry are both old leading securities firms in Shanghai and are also one of the oldest and largest comprehensive securities companies in China.

Guotai Junan Securities was established in 1999 by the merger of Guotai Securities and Junan Securities, which were born in 1992, and has long maintained the industry's top three comprehensive strength; it was listed on the A-share market in 2015 and the H-share market in 2017.

Haitong Securities was established in 1988, listed on the A-share market in 2007, and the H-share market in 2012.

The two have competed for the second place in the industry for many years.

Haitong Securities once performed better than Guotai Junan, but in recent years, Haitong Securities has obviously declined, facing dual tests of performance and compliance.

With the merger of the two, there may be no Haitong on the market.

Public information shows that the actual controller of Guotai Junan Securities is Shanghai International Group Co., Ltd., and the equity of Haitong Securities is relatively dispersed, mainly led by Shanghai Guosheng (Group) Co., Ltd. and other local state-owned enterprises in Shanghai.

Some securities firms have said that the merger of the two local securities firms in Shanghai will help integrate various businesses later.

The merger of the two will create a securities firm of what scale?

According to the calculation of "Finance and Economics", the semi-annual report data shows that as of the first half of 2024, the total assets of Guotai Junan were 898.06 billion yuan, and Haitong Securities were 721.415 billion yuan.

After the merger of the two, the total asset size reached 1.62 trillion yuan, ranking first in the industry.

In terms of net assets, according to the semi-annual report, as of the first half of the year, the net assets of Guotai Junan were 145.955 billion yuan, and Haitong Securities were 155.446 billion yuan.

After the merger of the two, the total scale reached 301.401 billion yuan, ranking first in the industry.

From the perspective of revenue and profit, Guotai Junan achieved a business income of 17.07 billion yuan in the first half of the year, ranking second in the industry.

The business income of Haitong Securities was 8.865 billion yuan, and the simple merger calculation, the revenue scale was 25.935 billion yuan, ranking second in the industry.

In terms of net profit, the two securities firms achieved a net profit of 5.016 billion yuan and 953 million yuan respectively in the first half of this year, and the net profit scale after the merger was 596.9 billion yuan, ranking second in the industry.

Haitong Securities once ranked in the top three of various indicators in the industry for many years, but the performance has declined seriously in the past two years.

Especially in terms of net profit, the net profit in the first half of the year was less than 1 billion yuan, and it has been squeezed out of the top ten.

However, from the perspective of various business data, the two will jump to the first place in the industry after integration.

According to the semi-annual report data, after the merger of the two, the brokerage business income was 8.484 billion yuan, investment banking income was 2.02 billion yuan, other business income was 11.991 billion yuan, all ranking first in the industry.

The asset management income of 3.357 billion yuan ranked second in the industry.

"From the perspective of revenue in 2023, Guotai Junan contributed a larger proportion of revenue in brokerage, asset management, and proprietary business.

Haitong Securities performed well in investment banking and net interest income.

Moreover, after the merger of the two, it will also become the securities company with the most business outlets, reaching 656."

Luo Huizhong, a non-bank analyst at Huaxi Securities, said that under the background of building a financial power and activating the capital market, he is optimistic about the performance of the capital market and the securities sector.

In addition, the scale of employees after the merger will also jump to the first place in the industry.

According to the semi-annual report, Guotai Junan has a total of 14,762 employees, and Haitong Securities has a total of 13,346 employees.

If simply added, the number of employees after the merger will reach 28,108, surpassing other securities firms.

However, due to the downturn in the market and the pressure on performance, many securities firms were in a state of reduction in the first half of the year.

The merger of the two strong companies will open a new round of mergers and acquisitions of securities firms.

The merger of Guotai Junan and Haitong Securities is beyond the market expectation, and to some extent, it seems to be within reason.

Strong financial institutions and international financial centers are key elements of financial powers.

The "Implementation Plan of Shanghai to Implement the Action Plan for Deepening and Promoting the Reform of State-owned Enterprises (2023-2025)" clearly proposes to "support leading securities companies to strengthen business innovation, group operations, mergers and reorganizations, and build first-class investment banks".

The fifth plenary session of the 12th Municipal Party Committee of Shanghai proposed to "deepen the action of deepening and promoting the reform of state-owned enterprises" and "focus on the construction of 'five centers' to increase the intensity of reform and opening up".

Industry insiders said that the merger of the two has three important meanings.

First, Shanghai urgently needs to build a world-class investment bank to help build an international financial center in Shanghai, and the merger and reorganization of leading securities firms will be an effective way.

Second, this merger will help the two parties to complement each other's advantages, enhance core functions, and improve the level of financial services to the real economy.

Third, this merger will help optimize the layout of Shanghai's financial state-owned capital and make the state-owned capital stronger, better, and larger.

In fact, in the past two years, there have been many mergers and acquisitions cases in the securities industry, especially this year, the process of securities mergers and acquisitions has obviously accelerated.

In March 2024, Zheshang Securities became the largest shareholder of Guodu Securities.

In June, Western Securities announced plans to acquire Guorong Securities.

In August, Guolian Securities planned to acquire 99.26% of the equity of Minsheng Securities.

In September, Guoxin Securities acquired 96.08% of Wanhe Securities by issuing shares.

The development of the securities industry cannot be separated from the support and encouragement of various national policies.

The regulatory authorities have repeatedly emphasized the promotion of leading securities companies to do well and strong.

In October 2023, the Central Financial Work Conference proposed to "cultivate first-class investment banks and investment institutions", "support state-owned large financial institutions to do well and strong", and "enhance the competitiveness and influence of Shanghai's international financial center".

In March 2024, the China Securities Regulatory Commission issued the "Opinions on Strengthening the Supervision of Securities Companies and Public Fund Management to Accelerate the Construction of First-Class Investment Banks and Investment Institutions (Trial)", proposing the goal of "forming 2 to 3 investment banks and investment institutions with international competitiveness and market leadership by 2035".

In April 2024, the State Council issued the "Several Opinions of the State Council on Strengthening Supervision, Preventing Risks, and Promoting High-quality Development of the Capital Market" (new "Nine Articles"), which proposed to "support leading institutions to enhance core competitiveness through mergers and reorganizations, organizational innovation, and other means, and encourage small and medium-sized institutions to develop differently and operate with characteristics."

Luo Zhuanhui, the chief analyst of non-bank research at Shenwan Hongyuan, said in the research report that at present, the internal and external environment for mergers and reorganizations in the securities industry has basically been in place.

Under the dual action of internal driving and policy orientation, the merger and integration of securities firms have accelerated.

However, mergers and integration need to be guided by the overall strategy of the company, looking for complementary targets (business complementarity, regional complementarity, etc.

), seeking control rights, and achieving consolidation.

At present, both leading securities firms and small and medium-sized securities firms have encountered their own development bottlenecks, and the regulatory authorities have actively expressed support for mergers and reorganizations.

The trend of internal mergers and integration in the securities industry is not decreasing.当然可以，不过您还没有提供需要翻译的内容。请提供您想要翻译的中文内容，我会帮您翻译成英文。