Xiao Jianhua

Hengtou Securities ends up 29 per cent in Hong Kong after Citic Guoan buys HK$11 billion of domestic shares

Citic Guoan, a unit of Chinese conglomerate Citic Group, will replace SASAC Beijing Xicheng District as the largest shareholder

PUBLISHED : Wednesday, 03 January, 2018, 1:57pm
UPDATED : Monday, 24 September, 2018, 3:16pm

Shares in Hengtou Securities soared by almost three quarters of their value in Hong Kong trading on Wednesday, before paring gains to 29 per cent at close, after the brokerage firm said its shareholders have agreed to sell a 30 per cent stake to Citic Guoan.

The 9 billion yuan (HK$10.8 billion) price tag for the stake represents a premium of more than 400 per cent to the share price.

Hengtou Securities opened higher on Wednesday morning and quickly jumped to HK$4.8, up 71 per cent from the previous close. It ended the day at HK$3.63, still up 29 per cent.

Nearly 18.5 million shares changed hands, worth a total of HK$74.5 million.

The company said on Tuesday night that nine of its major shareholders had signed a legally binding agreement with Citic Guoan, a unit of Chinese conglomerate Citic Group, to sell a combined 779.7 million domestic shares, a 29.94 per cent stake.

Hengtou Securities, also known as Hengtai Securities in mainland China, found itself in the spotlight last year because of its link to the missing Chinese tycoon Xiao Jianhua, who indirectly controls an almost 12 per cent stake in the company.

The big questions about missing tycoon: why and why now?

After the deal, Citic Guoan will replace SASAC (the State-owned Assets Supervision and Administration Commission) Beijing Xicheng District as the largest shareholder.

SASAC Beijing Xicheng District oversees companies in the district owned by the government.

Currently, SASAC Beijing Xicheng District holds a 20.74 per cent stake, while Baotou Huazi Industry, controlled by Xiao’s Tomorrow Holding, owns 11.83 per cent.

The 9 billion yuan (HK$10.84 billion) price to be paid by Citic Guoan is equivalent to 11.54 yuan (HK$13.9) per domestic share, more than four times the Hong Kong-listed stock price.

Hengtou said the nine shareholders include Beijing Qingyun Intercontinental Technology, Zhongchang Hengyuan Holdings and Shanghai Yida Technology Investment.

Still, the deal is subject to the signing of a definitive agreement by both parties before March 31 and the approval of the China Securities Regulatory Commission (CSRC).

The final value of the deal will also be determined by auditors and appraisers.

Currently, most mainland companies listed in Hong Kong are only allowed to partially float their shares in the overseas market. Owners of their domestic shares cannot trade them on the Hong Kong market.

Last Friday, the CSRC said it would launch a trial programme to allow Hong Kong-listed mainland firms to issue all of their shares in Hong Kong – known as full circulation of H shares – a move that could increase the public float of such companies. The regulator said the first pilot project would involve no more than three companies, but did not elaborate on the details.