Top brokers eye stake in Changjiang venture
Merrill Lynch and Goldman Sachs lead foreign firms targeting BNP's 33pc share
Merrill Lynch, Goldman Sachs and other foreign brokerages are in talks to buy the 33 per cent stake held by BNP Paribas in a joint venture with China's Changjiang Securities, according to sources.
Changjiang BNP Paribas Peregrine, set up in November 2003 as the third Sino-foreign venture to secure a brokerage licence, has retained the legal structure of the operation even after BNP announced it would sell the minority stake to its local partner.
Foreign brokerages were lining up to buy the stake as it remained difficult to get a licence on their own in an industry the government was trying hard to protect through measures including a halt to approval of Sino-foreign ventures, sources said.
Only seven joint-venture securities firms have been formed so far. These are China International Capital Corp, BOC International (China), China Euro Securities, Changjiang BNP Paribas Peregrine Securities, Daiwa SMBC-SSC Securities, Goldman Sachs Gaohua Securities and UBS Securities.
Merrill Lynch signed a memorandum of understanding with Huaan Securities in January 2005 to set up a venture but has not yet received final regulatory approval.
International Finance Corp, the World Bank's investment arm, is also awaiting approval for its plan to buy a small stake in Changjiang BNP.
BNP, which had management control with a minority stake, pulled out of the venture as it disagreed with Changjiang Securities on the direction of corporate development.
Merrill Lynch and Goldman Sachs declined to comment. A Changjiang BNP spokeswoman said she was unaware of the matter.
BNP's withdrawal would affect Changjiang Securities' future partnership with other foreign brokerages, the source said. Also, some employees in the investment banking division had already left for other brokerages, he said.
'Selling a stake to foreign investors may not be the first priority on Changjiang Securities' agenda right now,' the source said. 'The listing is more important.'
Changjiang Securities is planning a back-door listing on the Shanghai Stock Exchange by acquiring Sinopec unit Shijiazhuang Refining & Chemical, according to the oil refiner's announcement to the exchange yesterday.
The transaction will allow Changjiang Securities, valued at 10.3 billion yuan, to become the nation's fourth listed brokerage, giving it another fund-raising channel.
The mainland brokerage rebounded last year after years of slump, thanks to the buoyant stock market that boosted trading commissions and investment income.
However, Changjiang BNP did not benefit from the market rally as much as other brokerages because most of the revenue came from underwriting initial public offerings and bond sales as well as advising on financial deals.