Tencent to Buy 5% Stake in Investment Bank CICC

Chinese tech giant Tencent Holdings agreed to buy an almost 5% stake in China’s leading investment bank, China International Capital Corp. (CICC), creating a partnership between two of the country’s tech and finance majors, according to a regulatory filing Wednesday by Hong Kong-listed CICC.

Tencent Mobility, a unit of Tencent, will acquire 207.5 million newly issued CICC shares in Hong Kong for HK$ 2.84 billion ($371.6 million), equivalent to 4.95% of CICC’s total equity, according to the statement. The transaction will make Tencent the fourth-largest shareholder of CICC.

The deal marks another investment by China’s tech giants in the traditional financial sector amid the country’s fast development of the fintech sector. Last week, Reuters reported that China’s second largest e-commerce company, JD.com, was in talks with First Capital Securities Co. for a possible purchase of a 24% stake in the brokerage.

Tencent will pay HK$13.08 for each CICC share, representing a discount of almost 11% from CICC’s closing price Wednesday. The deal is subject to approval by relevant regulatory authorities, CICC said. Funds from the share sale will supplement the company’s capital and support its overseas business development, CICC said.

CICC and Tencent also entered a strategic partnership to jointly explore financial technology and service development. The partnership will serve as an important step toward CICC’s goals of expanding the scale of its wealth management business and accelerating wealth management transformation using financial technology. The arrangement gives CICC access to Tencent’s extensive user base and advanced technology in big data, artificial intelligence and internet security, said CICC.

“The partnership will help CICC develop technology-based wealth management services to offer more differentiated financial solutions to its clients,” said Bi Jianming, CICC’s chief executive.

Tencent President Liu Jiping said Tencent is looking for cooperation with CICC in developing financial products and services, combining Tencent’s technology with CICC’s capacity in wealth management.

CICC was founded in 1995 as a joint venture between China Construction Bank and Morgan Stanley. It was the country’s first investment bank partnership involving a foreign company. Morgan Stanley left the venture in 2010. CICC was listed on the Hong Kong Stock Exchange in November 2015.

In July, CICC announced its first overseas acquisition as it bought a majority stake in the U.S.-based asset management firm Krane Funds Advisors LLC for an undisclosed price. KraneShares, as the U.S. firm is commonly known, manages $738.6 million of assets.

Contact reporter Han Wei (weihan@caixin.com)