New Bidders Join Race for Stakes in Securities Firm Linked to Tomorrow Holding

A consortium led by state-owned investment company China Chengtong Holdings Group joined the bidding for a takeover of New Times Securities Co. Ltd., a securities firm linked to fallen tycoon Xiao Jianhua’s Tomorrow Holding Co. Ltd.

China Chengtong will partner with Shanghai-listed Dongxing Securities Co. Ltd. to bid for the 98.24% stake in New Times Securities, Dongxing said in a filing Thursday. Under the partnership, Dongxing will use its own funds to acquire 34.385% of New Times Securities while China Chengtong will take the majority 63.855%, according to the filing.

New Times Securities is one of nine financial companies controlled by Tomorrow Holding that were taken over by financial regulators in July 2020 as part of efforts to untangle the secretive conglomerate’s sprawling financial empire. The nine companies, which also included now-defunct Baoshang Bank, played a key part in Xiao’s murky business operations and backed many high-profile acquisitions. Chinese authorities detained the tycoon in January 2017 as part of an investigation into corruption.

Regulators initially planned to take over the institutions for one year, but the seizure was extended for a further 12 months in July this year.

In September, shareholders in New Times Securities put their combined 98.24% stake up for sale as part of the regulatory efforts to revamp the troubled company.

The eight largest shareholders of New Times Securities, some of whom relate to Tomorrow Holding, listed their holdings of 2.9 billion shares for sale on the China Beijing Equity Exchange, a property rights trading platform based in the capital. They are aiming to raise at least 13.1 billion yuan ($2 billion), according to a filing on the exchange.

On Sept. 27, Shenzhen-listed Western Securities Co. Ltd. said it would join hands with Beijing municipal government-backed Beijing Financial Holdings Group Co. Ltd to bid for New Times Securities’ stakes.

Dongxing said in the Thursday filing that the proposed deal aims to assist regulators’ efforts to defuse financial risks as well as improve its own resource allocation and profitability.

Dongxing added that there are still uncertainties in the bidding as a takeover will require multiple approvals by the companies and regulators.

Caixin learned that a group of state-backed investors including China Chengtong, Beijing Financial Holdings, among others, has discussed with New Times Securities for the acquisition in February, offering about 10 billion yuan for the stakes. But no deal has been settled due to disagreements over the price.

In 2020, New Times Securities reported a net profit of 36.5 million yuan on revenue of 1.6 billion yuan. Its net assets stood at 10.2 billion yuan at the end of last year, the company’s 2020 annual report showed.

Dongxing in 2020 posted revenue of 4.4 billion yuan with 1.5 billion yuan net profit. Its total assets were 77.9 billion yuan by the end of 2020. According to China Securities Association, Dongxing ranked 26 in the industry based on its revenue, compared with 30 of rival bidder Western Securities.

Tang Ziyi contributed to the story

Contact reporter Han Wei (weihan@caixin.com)

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