CICC, China Investment Securities Said to Be in Merger Talks

(Bloomberg) -- Investment bank China International Capital Corp. and brokerage China Investment Securities Co., firms with 186 billion yuan ($28 billion) of assets last year, are in talks on a possible merger, people familiar with the matter said.

A transaction is not certain, and the structure of any deal is yet to be decided, the people said, asking not to be identified because the talks are private.

CICC's shares jumped on the news, trading as much as 3.7 percent higher in Hong Kong. Investors may be betting that a merger would help CICC's efforts to reinvent itself under Chief Executive Officer Bi Mingjian after slipping from top Chinese brokerage by revenue in 2005 to No. 23 a decade later.

Linking up could be “a good deal for CICC,” said Lucas Wang, a Hong Kong-based analyst at First Shanghai Securities Ltd. “CICC's strength has been with high net worth individuals and corporate clients; the network and mass-market client base of China Investment Securities will be a good fit.”

CICC's shares closed up 1.5 percent on Monday. Later, in a statement to the exchange, CICC said it was in “very preliminary” discussions with China Investment Securities on “strategic cooperation and business opportunities” and it wasn't certain that a transaction would proceed.

China's Goldman

Set up in 1995, Beijing-based CICC was part-owned by Morgan Stanley until that firm sold out in 2010. Run by Levin Zhu, the son of then-Premier Zhu Rongji, it brought some of the country's biggest state-owned firms to market, becoming known as China's answer to Goldman Sachs Group Inc.

As part of CICC's efforts to drive a revival, it raised $811 million from an initial public offering in Hong Kong in November, earmarking money for expansions in equity sales and trading, wealth management and international business. During last year, surging income from brokerage commissions and asset management helped to drive up profit.

The company that CICC may combine with, Shenzhen-based China Investment Securities, sat at No. 17 in the revenue rankings for last year, where Citic Securities Co. was No. 1, according to Securities Association of China data.

China Investment Securities is 100 percent owned by Central Huijin Investment Ltd., according to the brokerage's website. Huijin, a unit of China's sovereign wealth fund, owns 28.4 percent of CICC, according to CICC's website.

Huijin's Revamps

A deal would follow previous revamps of brokerages controlled by Huijin. Shenyin & Wanguo Securities Co. and Hong Yuan Securities Co. were combined in a $6.4 billion deal struck in 2014, creating one of the nation's biggest brokers, Shenwan Hongyuan Group Co. Another broker controlled by Huijin, China Galaxy Securities Co., was listed in 2013.

Here's how CICC and China Investment Securities compared in 2015, based on data from their websites and annual reports:

• Assets: CICC, 94.1 billion yuan; China Investment Securities, 92.2 billion yuan
  
  
• Full-year profit increase: CICC, 75 percent; China Investment Securities, 194 percent
  
  
• Net income: CICC, 1.95 billion yuan; China Investment Securities, 3.6 billion yuan
  
  
• Branches: CICC, 20; China Investment Securities, 160
  
  

There was no immediate response to an e-mail sent to the Beijing-based press office of Central Huijin's parent, China Investment Corp., and no one answered a call to China Investment Securities seeking comment.

--With assistance from Cathy Chan and Zhang Dingmin To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net, Jun Luo in Shanghai at jluo6@bloomberg.net. To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Paul Panckhurst, Russell Ward

With assistance from Jun Luo, Steven Yang