In a move to replenish working capital, repay debts and fund the costs for the proposed merger, Guotai Junan plans to raise up to RMB10 billion from its controlling shareholder Shanghai State-owned Asset Management Co. via a share placement. The brokerage will place up to 626.2 million A shares at RMB15.97 each, according to its plan.
Guotai Junan Securities Co. and Haitong Securities Co. unveiled the terms of their proposed merger to create a state-backed brokerage with US$226 billion ($295.3 billion) in assets to compete with Wall Street firms expanding in the country.
Under the share swap deal, Guotai Junan will issue A shares and H shares to all holders of its smaller rival Haitong at a ratio of 0.62 to 1. The exchange offer is worth RMB8.57 ($1.58) in China, or a 2.3% discount on Haitong shares in Shanghai before they were suspended last month. In Hong Kong, the swap is worth HK$4.79 (81 cents) each, a premium of 32%, according to Bloomberg calculations.
