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

A closely watched trillion-dollar “aircraft carrier” merger in the brokerage industry is coming into view.

On October 9, Guotai Junan and Haitong Securities released merger and restructuring-related proposals and resumption announcements at the same time. The two companies’ stocks are set to resume trading on October 10, which is 8 trading days earlier than the expected schedule.

According to the latest announcements, this merger will be carried out as a share-swap absorption merger in which Guotai Junan issues shares to absorb Haitong Securities. The share-swap ratio between Haitong Securities and Guotai Junan is 1:0.62. For the A-share and H-share legs, the same share-swap ratio will be used—meaning that 1 share of Haitong Securities’ A-share/H-share stock can be exchanged for 0.62 shares of Guotai Junan’s A-share/stock.

After the merger is completed, Haitong Securities will terminate its listing and have its legal entity status revoked. After the merger, the company will use a new corporate name.

As the smooth advancement of the merger and restructuring of the two top-tier brokerage firms continues, the capital markets also moved at the news. On October 10, Guotai Junan and Haitong Securities’ A-shares both hit the daily limit at the resumption. By the close that day, Guotai Junan was at 16.17 yuan, while Haitong Securities was at 9.65 yuan.

The restructuring plan is unveiled and will use a new company name

According to the merger transaction prospectus released by Guotai Junan and Haitong Securities, the deal will be structured as a share-swap absorption merger in which Guotai Junan will absorb Haitong Securities. Specifically, Guotai Junan will issue Guotai Junan A-share stock to all A-share exchangeable shareholders of Haitong Securities, and issue Guotai Junan H-share stock to all H-share exchangeable shareholders of Haitong Securities.

After the merger is completed, Haitong Securities will terminate its listing and have its legal entity status revoked. Guotai Junan will apply for the A-shares issued in this share-swap absorption merger to be listed and traded on the Shanghai Stock Exchange main board, and for its H-shares to be listed and traded on the Main Board of the Hong Kong Stock Exchange. After the merger, the company will adopt a new corporate name.

On pricing, the share-swap absorption merger will use market prices for the exchange, with the A-share and H-share sides adopting the same share-swap ratio. The A-share exchange price will be determined based on the average trading price of Guotai Junan’s A-share stock over the 60 trading days prior to the pricing benchmark date, adjusted for ex-rights and ex-dividends, and the A-share and H-share exchange ratios will 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, and Haitong Securities’ H-share exchange price is 4.79 Hong Kong dollars per share.

In addition, on the basis of this share-swap absorption merger, Guotai Junan plans to issue A-share stock to its controlling shareholder, Shanghai State-owned Assets Operation Co., Ltd., to raise supporting funds of no more than 10 billion yuan worth of A-shares. The controlling shareholder will increase its holdings of Guotai Junan shares through a targeted share purchase at net asset value per share, above the share price before trading suspension, and will commit not to reduce its holdings within 5 years.

Guotai Junan and Haitong Securities both belong to financial institutions under Shanghai’s state-owned assets. As of the end of June 2024, Guotai Junan’s total asset scale reached 898.06 billion yuan, with 37 securities branch offices and 345 securities outlets domestically, as well as 25 futures branch offices. Haitong Securities’ total asset scale is 721.415 billion yuan, with 29 securities branch offices and 311 securities outlets domestically, 11 futures branch offices, and 34 futures outlets. After the two companies merge, the total assets and net assets of the surviving company will be 1.6195 trillion yuan and 331.1 billion yuan, respectively, both ranking first in the industry.

Regarding the impact of this transaction, Guotai Junan said that the surviving company’s principal business will remain unchanged, and core competitiveness will be significantly strengthened across multiple aspects, including capital strength, client base, service capabilities, and operational management.

Worth noting is that “Guotai Junan” was formed through the merger of the former Guotai Securities and the former Junan Securities. The market is closely watching how the post-merger company will be named, given this strong collaboration between Guotai Junan and Haitong Securities.

Tianyancha shows that Guotai Junan applied to register more than 20 trademarks on September 8, with names including “Guotai Haitong,” “Haitong Guotai,” “Guotai Junan Haitong,” “Haitong Guotai Junan,” “Haitong Junan,” “Junan Haitong,” “Haitong Guojun’an,” and others. Currently, all trademark statuses are “awaiting substantive examination.”

The demonstration effect is highlighted and it may accelerate the pace of brokerage M&A

Since this year began, various M&A and restructuring support policies have been rolled out intensively. In particular, since the release of the “New Nine Articles,” the CSRC has taken multiple measures to stimulate vitality in the M&A and restructuring market, and the activity level of listed companies in M&A and restructuring has gradually increased.

At the same time, regulators have clearly stated support for top-tier brokerages to strengthen and improve themselves by doing better through M&A and restructuring. On September 24, the CSRC issued the “Opinions on Deepening Market Reform for M&A and Restructuring of Listed Companies.” Among other points, it mentioned, “Support listed securities companies in enhancing their core competitiveness through M&A and restructuring, and accelerate the building of first-class investment banks.”

With “warm winds” from policy continuing to blow, and after Guotai Junan’s absorption of Haitong Securities was formally launched, market expectations for consolidation and restructuring in the securities industry have been heating up continuously. In the industry, M&A and restructuring case studies have been emerging one after another, including “Guolian + Minsheng,” “Guoxin + Wanhe,” “Western + Guorong,” “Zhejiang Merchant + Guodu,” “Huachuang + Pacific,” “Ping An + Founder Zheng,” and others. There are both cases of smaller and medium-sized brokerages banding together for mutual support, and cases of top-tier brokerages coming together for strong alliances.

Guojin Securities said that the merger of Guotai Junan and Haitong Securities achieves breakthroughs on two dimensions—between top-tier brokerages and between listed brokerages—whereas the merger is comparatively more difficult. For arrangements involving A/H valuation differences, share-swap ratios, and the like, it is expected to serve as a demonstration for the industry and accelerate the pace of industry M&A and restructuring, especially between other top-tier listed brokerages.

Everbright Securities’ analysis stated that this planned absorption merger by Guotai Junan of Haitong Securities is also a merger between securities firms of local state-owned assets. After the two companies merge, they will realize a strong alliance, and the new company’s overall strength is expected to rise to a leading position among brokerage industry players, building a “carrier-level” brokerage in the securities industry. Against the backdrop of regulatory policy guidance on “cultivating first-class investment banks and investment institutions” and the increasing divergence in profitability across the sector, securities-industry M&A and consolidation is expected to enter an accelerated period.

It is also worth noting that, driven by policy tailwinds and market sentiment, the A-share market has recently seen a wave of notable rallies, with brokerage stocks—often dubbed the “flag-bearer of bull markets”—showing outstanding performance.

According to Wind data, over the past month the brokerage index (886054.WI) has risen by 39%. From September 10 to today, gains of more than 40% have been recorded for brokers including GF Securities, CITIC Securities, Guohai Securities, Guoxin Securities, and CMB Securities.