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Southwest Securities has become the latest mainland brokerage to acquire a Hong Kong rival, after the trading arm of the Guangzhou city government bought Chong Hing Bank in a HK$12 billion deal last year.
In a statement to the Shanghai stock exchange, the Chongqing-headquartered broker said its board had agreed to take over Hong Kong-traded Tanrich Financial Holdings for an undisclosed amount.
The company said its overseas subsidiary, Southwest Securities International Investment, would acquire Tanrich.
Since the subsidiary has HK$700 million of cash in hand, market watchers estimate it could be a HK$700 million deal.
Unlike large global investment banks that serve institutional investors, the city's local brokerage business is highly fragmented and predominantly retail-driven.
Many of the local players are under pressure because of record-low commission rates and competition from banks that can leverage their existing client base.
The Tanrich deal, which is still pending regulatory approval and due diligence, follows two prominent acquisitions of local family-controlled banks - Chong Hing and Wing Hang Bank. The latter was acquired by Singapore lender Oversea-Chinese Banking Corp for HK$38.4 billion last year, the biggest acquisition after DBS gained control of Dao Heng Bank in a deal worth HK$10 billion in 2001.
Haitong Securities bought a 53 per cent stake in Taifook Securities Group for US$245 million in 2009, giving the mainland broker a springboard for overseas expansion.
Trading in Tanrich shares, which have soared 67 per cent this year, was suspended yesterday shortly after the market opened.
Phone calls and e-mails to deputy chairman Kwok Kam-hoi on the proposed takeover were unanswered.
In contrast to a buoyant environment for mergers and acquisitions in developed markets, such deals are rare in Hong Kong largely because of the culture of family-controlled businesses. Only six finance-related merger and acquisition deals amounting to US$490 million took place this year, according to Dealogic.


Chongqing broker Southwest Securities buys Tanrich for HK$700m

Kwok Kam-hoi, deputy chairman of Tanrich.

Business

Money

Markets & Investing

Southwest Securities has become the latest mainland brokerage to acquire a Hong Kong rival, after the trading arm of the Guangzhou city government bought Chong Hing Bank in a HK$12 billion deal last year.
