Haitong Securities Co. is mulling to take private its Hong Kong-listed investment banking unit, people familiar with the matter said, as it seeks to gain full control to turn around the loss-making arm.
The Shanghai-based brokerage is looking to buy out Haitong International Securities Group Ltd., of which it already owns 73.4%, the people said, asking not to be identified as the information is private. The deliberations have been going on for a while, and details on the potential transaction remain unclear, according to the people.
Trading in Haitong International’s shares and bonds were halted Wednesday pending an announcement under the takeover code. Haitong didn’t immediately respond to an emailed request for comment, while the unit referred to the Hong Kong exchange announcement when asked by Bloomberg.
A take-private could mark the parent’s further efforts to revamp the unit after it was rocked by unprecedented losses last year due to shortfalls in its equity and debt investments. It’s also in line with the firm’s earlier guidance to create “one Haitong” that connects the Hong Kong and mainland teams.
The parent had taken a slew of measures to help the Hong Kong unit “regain its glory.” It sent a working group to review operations at Haitong International this year and halted the expansion of its investment business. Haitong also tightened control by naming its domestic securities finance chief to co-head the Hong Kong unit.
While losses at the Hong Kong arm narrowed to HK$781 million ($100 million) in the first half from a year earlier, its earnings outlook still hinges on a rebound in initial public offerings as well as the secondary markets.
IPO proceeds in Hong Kong were down 65% in the first eight months this year on the annual comparison, as headwinds from high interest rates to volatility in Chinese shares put investors and new share issuers on the sidelines.
Haitong International has been trying to reduce earnings volatility stemming from trading and focus on advisory and fee-based operations such as investment banking. The firm back in 2020 said controlling risks would be a greater priority going forward. It has scaled back in both the US and Europe.
--With assistance from Denise Wee and Jun Luo.
