Shares in Citic Securities dropped yesterday following news that the mainland investment bank will purchase a minority stake in Hong Kong-headquartered brokerage CLSA.
In Hong Kong the stock fell 7.3 per cent to HK$13.48, while the Shanghai share price fell 4.1 per cent to 12.30 yuan.
On Friday, it was announced that Citic Securities had completed the purchase of a 19.9 per cent stake in CLSA for US$310.32 million in cash from Credit Agricole Corporate and Investment Bank, a subsidiary of Credit Agricole Group, one of the largest French financial institutions.
Under Friday's agreement, Citic Securities has an option to buy the remaining 80.1 per cent stake in CLSA from Credit Agricole for US$941.68 million in cash. The option expires on March 31 next year.
In a joint press release, CLSA and Credit Agricole said they intend to work towards the completion of the deal to sell 80.1 per cent of CLSA to Citic Securities by June 30. If the deal goes through, Citic Securities would purchase the whole of CLSA for US$1.252 billion.
'It's an all-cash deal. The market doesn't like it,' Macquarie analyst Rachel Li said.