Caixin
Apr 16, 2019 08:27 PM
FINANCE

Credit Suisse to Pay Over $90 Million to Take Control of Joint Venture

Credit Suisse in Zurich, Switzerland in November 2011. Photo: IC
Credit Suisse in Zurich, Switzerland in November 2011. Photo: IC

* Credit Suisse intends to raise its interest in its joint venture, Credit Suisse Founder Securities, to 51% from 33.3%

* Of the 628.5 million yuan investment, 289 million yuan will be added to the venture’s authorized capital — now at 800 million yuan — while the rest will go to its capital reserve

(Beijing) — Swiss investment bank Credit Suisse plans to shell out 628.5 million yuan ($93.7 million) to become controlling shareholder of its Chinese securities joint venture, an exchange filing showed Monday.

The pricing marks the latest development in the acquisition, which comes amid China’s broader drive to grant foreign investors wider access to its financial markets.

Credit Suisse intends to raise its interest in the Beijing-based Credit Suisse Founder Securities Ltd. to 51% from 33.3% by increasing the firm’s capital, according to a filing (link in Chinese) by the Shanghai-listed Founder Securities Co. Ltd., the other shareholder of the venture. If the deal is sealed, Founder Securities’ stake will drop to 49% from 66.7%.

The three companies have signed an agreement sanctioning the deal, the filing said, adding that the transaction is pending Chinese regulatory approval. Of the 628.5 million yuan, 289 million yuan will be added to the venture’s authorized capital — now at 800 million yuan — while the rest will go to its capital reserve, the filing said.

In April 2018, the China Securities Regulatory Commission (CSRC) issued rules raising the ceiling on foreign ownership of Chinese mainland-based securities firms to 51% from the previous 49%.

In May, Credit Suisse sent letters about the capital injection plan to Founder Securities and the joint venture, the filing said. The next month, Founder Securities’ board of directors approved the plan.

Credit Suisse’s acquisition will also solve a problem that Founder Securities has long faced. In 2014, Founder Securities acquired the entirety of China Minzu Securities Co. Ltd., which caused it to run afoul with the CSRC’s competition rules. At the time, the regulator required (link in Chinese) Founder Securities to solve the problem within five years.

Founder Securities is controlled by the state-owned Peking University Founder Group Co. Ltd., 70% of which is owned by Peking University. In 2008, the company and Credit Suisse jointly set up Credit Suisse Founder Securities, which provides capital market services such as sponsoring and underwriting shares and bonds on the mainland.

Several other global financial giants have also won approval to control brokerages on the mainland. In November, Swiss financial titan UBS Group AG became the first foreign firm to get approval to take control of a mainland securities joint venture, raising its stake in UBS Securities Co. Ltd. to 51%. Last month, the U.S.-based JPMorgan Chase & Co. and Japan’s Nomura Holdings Inc. each won approval to set up new securities joint ventures on the mainland with majority foreign ownership.

Since last year, China has accelerated the pace at which it has been opening up its financial sector. In November, German insurer Allianz Group got the nod to set up China’s first wholly foreign-owned insurance holding company, while American Express Co. became the first foreign firm to win access to China’s bank-clearing market. In January, global credit ratings agency Standard & Poor’s won the first approval to independently assess the quality of bonds in China.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)

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