China International Capital Corp. Ltd., a top domestic securities firm, plans to raise up to 27 billion yuan ($3.9 billion) with a rights issue in Shanghai and Hong Kong to fund the expansion of its business amid fierce competition between Chinese brokerages.
(Bloomberg) — China International Capital Corp. Ltd., a top domestic securities firm, plans to raise up to 27 billion yuan ($3.9 billion) with a rights issue in Shanghai and Hong Kong to fund the expansion of its business amid fierce competition between Chinese brokerages.
Under the plan, the Beijing-based state-controlled investment bank proposes to issue up to three rights shares for every 10 of its Shanghai and Hong Kong-listed shares, according to a company filing with the Shanghai bourse.
The fundraising, the latest in a series of such moves by domestic brokers, comes as competition heats up in the Chinese securities industry, with U.S. rivals such as Citigroup Inc. and JPMorgan Chase & Co. moving to get a bigger slice of business in the world’s second-largest economy.
A total of eight Chinese brokerages including CICC’s arch-rival Citic Securities Co. have raised more than 80 billion yuan through rights issues, private share placements and convertible bond offers this year, the official Shanghai Securities News said in a report Wednesday.
The Chinese government has said it wants more concentration in the highly-fragmented industry, calling for the creation of “aircraft-carrier sized” brokerages that can compete with the likes of Goldman Sachs Group Inc. as the markets open. Together, China’s brokers have assets that are similar to what Goldman Sachs alone has.
“In the face of competition from foreign financial institutions and cross-sector institutions, local leading securities firms need to accelerate the pace of internationalization and actively participate in the international market,” CICC said in the statement.
Expansion Plans
CICC will use 24 billion yuan of proceeds raised from the planned rights offer to bankroll the expansion of traditional businesses from asset management to private equity as well as for the development of international businesses, fintech and “digital transformation” to boost its competitiveness overseas.
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The remaining proceeds from the offer, which calls for issuance of a total of about 1.45 billion rights shares and requires regulatory approval, will be used to supplement working capital, the statement said.
Its controlling shareholder Central Huijin Investment has promised to fully subscribe to the rights offer in cash, it added.
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