Ping An in Talks for Partial Stake in Credit Suisse’s Chinese Partner

Ping An Insurance Group Co. has agreed to acquire a majority stake in the newly-established Founder Group for as much as 50.75 billion yuan ($7.9 billion).

The Chinese insurer plans to buy a 51.1% to 70% stake in the new Founder Group, whose assets include Founder Securities Co., Founder Technology Group Corp. and China Hi-Tech Group Co., according to a statement to Shanghai stock exchange on Friday. The size of the deal could range from 37.05 billion yuan to 50.75 billion yuan, the statement said.

Peking University Founder Group Corp. has been in court-led restructuring proceedings since early last year and has defaulted $3 billion of dollar bonds and 34.5 billion yuan of onshore bonds, according to data compiled by Bloomberg. In January, Ping An Insurance was introduced as one of the investors as Founder Group continues with its restructuring plans.

The announcement confirmed an earlier Bloomberg News story that Ping An was in talks to acquire a partial stake in Founder Securities. Peking University Founder Group holds an about 28% stake in the Shanghai-listed broker.

A working team from Ping An has been conducting due diligence on Founder Securities, the Chinese partner of Credit Suisse Group AG, people familiar with the matter have said. The Chinese insurer is considering to combine Founder Securities with Ping An Securities Co., according to the people, who asked not to be identified as the information is private.

Shares in Founder Securities pared losses after the Bloomberg News report on Friday. It closed 3.8% lower after falling as much as 8.4%. The company has a market value of about $11.7 billion.

Ping An Securities is among the few major Chinese brokers that remain private. The companies, if combined, could have total assets of 245 billion yuan ($38 billion), making the entity one of China’s top 10 players, according to data compiled by the Securities Association of China.

The deal comes as China’s $1.4 trillion securities industry is facing rising pressure as Wall Street firms such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. are in line to gain full control of their brokerage ventures. The intensifying competition could fuel consolidations among local brokerages and winnowing out those that can’t compete.

Credit Suisse last year raised its stake in its securities joint venture with Founder from 33% to 51% and is seeking to gain full control as soon as possible. Goldman Sachs and JPMorgan are also racing to be the first with 100% ownership in their China’s joint ventures.

Meanwhile, local brokers are beefing up their capital and competitiveness over the past few years. Citic Securities Co. bought Guangzhou Securities Co. in a $2 billion deal in 2019. A potential merger between China’s two largest investment banks -- Citic and CSC Financial Co., is gaining traction, Bloomberg reported in July.

©2021 Bloomberg L.P.

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