Skyway becomes latest Hong Kong broker to be bought by mainland buyers

Mainland firms eager to acquire HK peers for business licences required to operate in the city, or to help them capture and expand overseas opportunities

PUBLISHED : Thursday, 09 March, 2017, 5:59pm
UPDATED : Thursday, 09 March, 2017, 10:57pm

Shares in Hong Kong’s Skyway Securities Group soared as much as 12.7 per cent on Thursday after it said it was being jointly bought by mainland firms China Minsheng Banking Corp and China Huarong Asset Management for HK$864 million (US$111.351), despite a huge 81 per cent discount to its current share price

The move marks the latest mainland acquisition of a Hong Kong broker, a trend developing to allow Chinese companies to gain business licences in the city, but also in many cases to help lead their future overseas ambitions.

China Minsheng, through its subsidiary CMBC International, and Huarong, through its arm Brilliant Decent, will jointly buy stakes from two shareholders Lam Hoi-sze and Ai Qing, at 6 HK cents per share, an 81 per cent discount to its last closing price on Thursday, according to a Skyway statement.

They will also subscribe for 26.95 billion new shares issued by Skyway at 3.2 HK cents.

The two mainland firms will then hold a controlling 66.4 per cent share in Skyway, spending a total HK$864.8 million on the two transactions.

Skyway shares jumped as much as 12.7 per cent to 3.55 HK centsdespite the discount, but then settled flat at 3.15 HK cents.

“The company does not have any imminent funding needs, but the deal will strengthen its capital base and improve its balance sheet. The existing business will be enhanced in a number of ways such as the sharing of China Minsheng clients,” Skyway statement said.

“The group also aims to significantly expand its wealth management business providing high net worth customers.”

The deal comes five months after Skyway announced it had signed a memorandum of understanding to sell out to Shanghai-listed Soochow Securities in July, which had planned to buy at least 51 per cent stake in Skyway through a new share subscription. That has now lapsed.

China’s mid-sized brokerages seen buying Hong Kong rivals

In May last year, China Minsheng also walked away from a deal to buy Hong Kong-based financial firm Quam Limited.

Mainland financial firms are hungry to acquire Hong Kong peers, to gain a business licences required to operate in the city or capture opportunities internationally, said Wen Kit, wealth management strategist at Sun Hung Kai Financial.

“That trend will certainly continue, especially now that mainland companies are eager to spend money overseas, as the yuan depreciates,” Wen said.

Skyway holds Types 1, 2, 4, and 9 licences from Securities and Futures Commission, which allows it to deal in securities and futures contracts, advise on securities and manage assets.

Wen said price has become a difficult issue for such cross-border acquisitions.

“It is particularly hard when the market is so volatile, as both the buyer and seller may regret it afterwards if market condition change quickly,” Wen said.

The first purchase of a Hong Kong brokerage by a mainland rival came in 2009, when Haitong Securities bought Hong Kong-listed Tai Fook securities, now known as Haitong International Securities Group.