Since UBS merged with Credit Suisse, the ownership of Credit Suisse Securities' brokerage license has been the focus of market attention. Recently, this merger and acquisition case ushered in the "final chapter", Beijing state-owned assets is about to become the new controlling shareholder, and the original shareholder Founder Securities chose to liquidate and exit.
Source: Photo.com
Credit Suisse Securities will be controlled by Beijing state-owned assets, and its valuation has fallen by more than 20% from two years ago
On June 25, Founder Securities (601901. SH) announced the latest whereabouts of Credit Suisse Securities (China) Co., Ltd. (hereinafter referred to as Credit Suisse Securities).
Founder Securities, UBS S.A. (UBS; UBS) and Beijing State-owned Assets Management Co., Ltd. (hereinafter referred to as Beijing State-owned Assets Management Co., Ltd.) jointly signed the "Equity Sale and Purchase Agreement on the Equity of Credit Suisse Securities (China) Co., Ltd. 85.01% Equity", under which Founder Securities and UBS will sell 49% and 36.01% of Credit Suisse Securities to Beijing State-owned Assets Company respectively. After the completion of the equity transfer, Founder Securities will no longer hold a stake in Credit Suisse Securities, while UBS will retain a 14.99% stake in Credit Suisse Securities.
For the 49% equity of Credit Suisse Securities sold by Founder Securities, the transaction consideration was determined to be 885 million yuan after negotiation between all parties. Based on this calculation, the valuation of 100% equity of Credit Suisse Securities is about 1.806 billion yuan. As of December 31, 2023, the pricing benchmark date of this transaction, Credit Suisse Securities' book net assets were 1.063 billion yuan, and the premium rate of the equity transfer price was about 70%.
Founder Securities said that the company is expected to recover 885 million yuan in cash through this equity transfer, and the preliminary estimate will increase the net profit by about 273 million yuan, accounting for about 12.14% of the company's net profit in 2023.
As early as December 2021, the board of directors of Founder Securities agreed to the company's opportunity to sell the equity of Credit Suisse Securities. In September 2022, the company announced that it intends to transfer a 49% stake in Credit Suisse Securities to Credit Suisse (which has been merged with UBS) for a consideration of 1.14 billion yuan. At that time, it was announced that as of December 31, 2021, the appraisal value of all the equity of Credit Suisse Securities was 2.325 billion yuan, with an appreciation rate of 53.38%. Compared with two years ago, the current valuation of all interests of Credit Suisse Securities has fallen to about 1.806 billion yuan, a decrease of about 22%.
However, as of the end of 2023, Founder Securities has not received a reply from the CSRC on the filing of the above matters, which is related to another brokerage license held by UBS.
UBS is the controlling shareholder of UBS Securities Co., Ltd. (hereinafter referred to as UBS Securities), with a shareholding ratio of 67%, and Beijing State-owned Assets Company holds the remaining 33% of the shares. According to the relevant provisions of the Regulations on the Supervision and Administration of Securities Companies, the number of securities companies in which an institution or multiple institutions controlled by the same actual controller may participate in no more than two, and the number of securities companies holding no more than one shall not exceed one. UBS controls both Credit Suisse Securities and UBS Securities, and the license is faced with the choice of "one to go and one to stay".
According to media reports, Castle Securities and Ant Group are both eyeing Credit Suisse Securities' brokerage licenses. In April this year, there were market rumors that UBS considered changing its strategy and exchanging its stake in Credit Suisse Securities for its 33% stake in UBS Securities in exchange for its 33% stake in UBS Securities, at which time UBS could wholly own UBS Securities.
Now, control of Credit Suisse Securities is about to go to Beijing State-owned Assets Corporation, but the 33% stake in UBS Securities has not yet been determined.
Founder Securities' investment banking journey
Credit Suisse Securities was established in 2008 as a securities company jointly funded by Founder Securities and Credit Suisse, then known as "Credit Suisse Founder Securities Co., Ltd.", for the purpose of operating investment banking business in China. Credit Suisse Securities was established with a registered capital of 800 million yuan, and Founder Securities invested 533.6 million yuan to hold 66.7% of the shares, which was included in the scope of consolidated statements, and all investment banking-related businesses were transferred to Credit Suisse Securities.
Credit Suisse Securities quickly became one of the leading domestic investment banks after its establishment, with a cumulative underwriting amount of more than 38.1 billion yuan in 2010, and the market share of the lead underwriting amount increased from 1.51% in 2009 to 2.54%, and the ranking also rose from 20th to 13th. Credit Suisse Securities recorded an operating income of 310 million yuan and a net profit of 52.5103 million yuan in the current period.
However, 2010 became the "peak moment" of Credit Suisse Securities. In 2011, its net profit fell off a cliff to 4.5415 million yuan, and it suffered a loss for the first time in 2014. In 2018 and 2019, Credit Suisse Securities lost money for two consecutive years, and in 2020, the registered capital was increased and changed, the shareholding ratio of Founder Securities decreased to 49%, and the shareholding ratio of Credit Suisse increased to 51%, becoming its controlling shareholder. From June 1, 2020, Credit Suisse Securities will no longer be included in the consolidated financial statements of Founder Securities, and Founder Securities will account for its 49% equity as a long-term equity investment, with a book value of 721 million yuan at the end of 2020.
Judging from the performance from 2021 to 2023, Credit Suisse Securities achieved operating income of 497 million yuan, 289 million yuan, and 157 million yuan in each period, and net profit of 45 million yuan, -255 million yuan, and -199 million yuan respectively, with continuous losses in the past two years. In the first quarter of 2024, Credit Suisse Securities is still in a state of loss, recording an operating income of 19.3165 million yuan and a net profit of -34.4203 million yuan.
According to the annual report of Founder Securities, the company will recognize investment gains and losses of -90.0571 million yuan and -138 million yuan to Credit Suisse Securities in 2022 and 2023 respectively. As of the end of 2023, the book value of the company's long-term equity investment in Credit Suisse Securities fell to 521 million yuan.
Founder Securities said in its 2020 annual report that with Credit Suisse becoming the controlling shareholder of Credit Suisse Securities, the competition between China National Securities Co., Ltd. (hereinafter referred to as "Minzu Securities") and Credit Suisse Securities has been completely resolved.
In 2014, Founder Securities completed the acquisition of 100% equity of Minzu Securities. In November 2019, Minzu Securities changed its name to Founder Securities Underwriting and Sponsorship Co., Ltd. (hereinafter referred to as "Founder Underwriting and Sponsorship"), which is responsible for the investment banking business of Founder Securities. According to the 2023 annual report, Founder underwrote and sponsored 4.123 billion yuan of equity underwriting for the whole year, ranking 25th in the industry, up 4 places from the previous year, and 19.682 billion yuan of various bonds, of which 14.126 billion yuan was underwritten for corporate bonds and corporate bonds, ranking 47th in the industry.
From the perspective of the overall operating performance of Founder Securities, its operating income in 2023 will be 7.119 billion yuan and the net profit attributable to the parent company will be 2.152 billion yuan, and its performance will grow for five consecutive years, hitting a new high in seven years. The wealth management business is the first driving force in the rapid development of Founder Securities' business layout, with revenue of 5.02 billion yuan in 2023, and the number of customers and market share in the current period have both increased, of which the market share of net income from agency securities trading business has rebounded to about 2.9%, a three-year high.
Source: Founder Securities 2023 Annual Report
Since the beginning of this year, with the new "National Nine Articles" clearly supporting the head securities companies to enhance their core competitiveness through mergers and acquisitions, organizational innovation, etc., the mergers and acquisitions of "Zhejiang Entrepreneurs + Guodu" and "Guolian + Minsheng" have ushered in substantial progress 002673. SZ) also recently announced plans to acquire Guorong Securities.
As one of the four major mergers and acquisitions in the securities industry, "Ping An + Founder" has attracted market attention for a long time. In June 2024, in response to investors' questions about the progress of the company's integration with Ping An Securities, Founder Securities said on the interactive platform that it would promote relevant work in accordance with the reorganization investment agreement and regulatory requirements of Founder Group.