Author | Zelda
A legal auction will change the pattern of China's capital market in the next decade.
After three hours of intense bidding and 162 rounds of bidding, the 3.471 billion shares of Minsheng Securities held by Oceanwide Holdings were finally sold at a high price of 9.105 billion yuan.
Wuxi Guolian Development (Group) Co., Ltd. (hereinafter referred to as "Guolian Group") won the auction. Guolian Securities, another listed securities company under the group, is a rising star in the securities industry in recent years.
In the past few years, the performance of Guolian Securities has significantly outperformed the overall level of the industry. Entering 2023, it shows the ambition of accelerating its expansion.
At the beginning of February this year, Guolian Securities announced that it planned to control and manage over 100 billion yuan of Zhongrong Fund through acquisition; Only a month later, the controlling shareholder Guolian Group invested a huge sum of money to buy shares of Minsheng Securities. The market generally expected that the two securities companies would further integrate, and even the name of Guolian Securities had been thought out by netizens - "National Securities".
Behind the rapid growth of Guolian Securities, Wang Dongming, the "godfather of CITIC", is indispensable. At the call of Wang Dongming, the number of employees who left CITIC Securities and joined Guolian Securities has reached double digits in recent years. Guolian Securities is known as "small CITIC".
In 2019, when the "CITIC Group" collectively joined, the net profit attributable to the parent company of Guolian Securities increased by more than 900% that year; Subsequently, Guolian Securities restarted its IPO, and the meeting was held in less than half a year.
Honest and old, can you still eat?
Behind the huge investment in Minsheng Securities, Wang Dongming, who is over 70 years old, shows his ambition again. The great changes in China's financial situation in the future will be the prelude.
"The League of Nations is not cheap"
Minsheng Securities has always been the core asset of Oceanwide, and this auction came from the debt recovery of Oceanwide by Shandong Expressway Group.
In April 2019, Wuhan Central Business District Co., Ltd., a real estate subsidiary of Oceanwide Holdings, applied to Shandong Expressway Global Financial Leasing Co., Ltd. for a "bridge loan" of 2 billion yuan, with a term of three months, and the final loan defaulted.
In July 2021, Shandong Expressway Group froze Oceanwide's shareholding in Minsheng Securities, and then brought a series of lawsuits in Wuhan and Jinan, which finally passed the Jinan Intermediate People's Court and will start the auction.
According to the information of JD French auction platform, the starting margin of this French auction was up to 500 million yuan. Before the auction, three major buyers registered, including listed companies Soochow Securities and Zheshang Securities.
On the night before the auction, Soochow Securities and Zheshang Securities successively announced that they planned to participate in the bidding for the above equity of Minsheng Securities held by Oceanwide Holdings.
Soochow Securities said that participating in the auction will help to improve the overall size of the company, integrate customer resources, and increase business income and market share; Zheshang Securities said that the purpose of participating in this auction was to further improve the influence and resource integration ability of the securities business.
However, the last buyer has not unveiled the mystery for a long time. Many people thought that Shanghai state-owned assets intended to participate. Until the end of the auction, the market found that the original flower fell to the Guolian Group.
At 6:00 p.m. on the day of auction, Guolian Securities announced that it had received a notice from Guolian Group, the company's controlling shareholder, that the latter had won 30.3% shares of Minsheng Securities through judicial auction.
Guolian Securities Announcement
According to the data, the starting price of this auction is about 5.865 billion yuan, equivalent to 1.69 yuan per share, and the P/B ratio is 1.25 times; From the results, the transaction price of 9.105 billion yuan was 3.24 billion yuan higher than the auction price, which corresponded to a price to book ratio of about 2 times, much higher than the initial 1.25 times valuation.
There are many voices in the market that, "The League of Nations is not cheap this time.".
For reference, as of March 17, the median P/B ratio of A-share brokers was only 1.19 times.
The median price to book ratio of listed securities companies is only 1.19 times
In addition, in recent years, there is also a rare case of overvaluation of twice the price to book ratio in the acquisition of securities companies.
In 2020, Tianfeng Securities purchased Hengtai Securities, with a price to book ratio of 1.48 times; In the same year, Minsheng Securities introduced shareholders of Shanghai's two level SASAC, with a price to book ratio of only 1.19 times;
In 2021, when Oceanwide transfers the equity of Minsheng Securities to Shanghai Fengquanyu and others, the valuation is only 1.3 times the P/B ratio;
In 2022, the valuation of Guoxin Capital's acquisition of Huarong Securities and Wuhan Financial Holding's acquisition of Jiuzhou Securities will be 1.48 times and 1.77 times respectively.
It is worth noting that the "contemporary system", which also has debt problems and involves self financing, has transferred the equity of Tianfeng Securities to Hubei State owned Assets, and its valuation is also over one time.
What's the calculation behind the high price auction of Guolian Securities?
The rise of Guolian Securities
As early as September 2020, Guolian Securities planned to merge Guojin Securities. However, because the news spread widely in the market, the two companies only issued a public announcement to confirm the rumor a few days after the relevant plate changes, which triggered speculation about internal transactions, and finally the merger transaction was announced to be dead.
Two and a half years later, Guolian Securities had another opportunity to merge with another securities firm. Although Minsheng Securities is not as large as Guojin Securities, Guolian Securities still has the opportunity to launch an impact on the head brokers if it is successfully integrated.
The 2022 interim report shows that the revenue and net profit attributable to the parent company of Guolian Securities are 1.273 billion and 437 million respectively, ranking 36th and 27th among listed securities companies;
Minsheng Securities is not listed. According to the data in the evaluation report, the revenue and net profit attributable to the parent company are 1.54 billion and 426 million respectively, which are equivalent to the scale of Guolian Securities, ranking 33rd and 29th among listed securities companies.
Performance of listed securities companies
In a simple addition, if the two securities companies integrate smoothly, the revenue and net profit attributable to the parent company will increase to 2813 million and 863 million, It ranks 19th and 17th among listed securities companies, which means that small securities companies have become second-line securities companies.
Of course, in addition to directly improving the scale, What is more attractive to Guolian Securities is the advantage of Minsheng Securities' investment banking business.
According to the statistics of the Associated Press of Finance and Economics, Minsheng Securities will achieve IPO sponsorship and underwriting revenue of 979 million yuan in 2022, ranking eighth in the industry; The total amount of IPO underwriting recommendation was 12.654 billion yuan, ranking 9th in the industry;
In 2022, Minsheng Securities will have 26 IPO projects, and the number of IPO projects will rank the sixth in the industry; 16 listed companies, ranking eighth in the industry; 21 companies were listed in the stock transfer system, ranking first among the host securities companies.
Relatively speaking, the advantage of Guolian Securities is its financial management business.
Guolian Securities is the only small and medium-sized securities firm among the seven securities firms that won the qualification of fund investment advisory business in the first batch in 2020. In recent years, the company has also proposed the strategy of accelerating the transformation to pan wealth management business.
At the 2021 performance briefing, when asked about the planning and objectives of wealth management in the transition period, Ge Xiaobo, president of Guolian Securities, said that the company should be built into a high-quality financial product provider for high net worth customers, small and medium-sized banks and private placement, and become an influential wealth management expert in the market.
Compared with the financial management business, the investment banking business of Guolian Securities is much inferior.
In 2021, the business income of Guolian Securities Investment Bank is only 509 million, ranking 25th among listed securities firms; In the same period, Minsheng Securities' investment banking business achieved 2.062 billion yuan, four times that of Guolian Securities.
Under the comprehensive registration system, the importance of investment banking business to securities companies is self-evident. Taking the data of 2021 as an example, if the two securities firms integrate, the total income of investment banking business will be 2.57 billion yuan, which will exceed China Merchants Securities, ranking seventh among listed securities firms.
In addition to horizontal integration, Guolian Securities is also working on the public offering license.
On February 7, Guolian Securities announced that it planned to acquire 100% equity of Zhongrong Fund. Guolian Securities said that the acquisition of Zhongrong Fund can quickly obtain a mature public offering license, promote business integration and upgrading and pan wealth management transformation, and form a new profit growth point.
As 24.5% of Shanghai Rongsheng's 49% equity of China Financial Fund was in pledge status, it failed to release the pledge in accordance with the agreed time limit, and Guolian Securities subsequently announced that it would give up the wholly-owned acquisition, and the acquisition ratio dropped from 100% to 75.5%, but the general direction of holding the public offering license remained unchanged.
Guolian Securities Announcement
The acquisition has been brewing for a long time. Media reports have said that the office of China Financial Fund moved from Beijing Wangjing to COFCO Land Plaza where the Beijing headquarters of Guolian Securities is located as early as August 2022. Guolian Securities is on the 4th floor and China Financial Fund is on the 11th floor; After the transaction finally passes the regulatory approval, Zhongrong Fund will be renamed as Guolian Fund.
By the end of last year, 26 fund managers of China Financial Fund had managed 143 public funds, with a management scale of 110.754 billion yuan;
In terms of financial data, as of September 30, 2022, the total assets of Zhongrong Fund were 1.229 billion yuan, the total liabilities were 123 million yuan, and the net assets were 1.106 billion yuan; In the first three quarters of last year, the operating revenue was 336 million yuan, and the net profit was 6.2492 million yuan.
With the 33.4% stake of China Overseas Fund held by Guolian Securities, Guolian Securities will achieve "one participation and one control" of the public offering license after the completion of this acquisition.
At the same time, Guolian Securities also announced in April 2022 that it plans to invest 1 billion yuan to set up a wholly-owned asset management subsidiary. At present, the regulatory authorities have allowed the asset management subsidiary of securities companies to apply for public offering licenses. Guolian Securities is expected to achieve "one participation, one control, one license".
The "Godfather" made a comeback
The military strategist behind Guolian Securities is Wang Dongming, the former chairman of CITIC Securities, a figure at the level of "godfather" of Chinese finance.
When CITIC Securities was founded in 1995, Wang Dongming served as the general manager, and served as the chairman in May 2002 until his retirement in 2015.
In addition, Wang Boming, Wang Dongming's brother, is also a legendary figure in China's finance and is known as the "main driver of China's securities market".
Many years ago, it was Wang Boming and others who founded the "Joint Office for Research and Design of Stock Exchanges", also known as the "Joint Office".
In the early 1990s, "Joint Office" successively presided over or participated in the design, establishment and establishment of Shenzhen Stock Exchange, Shanghai Stock Exchange and China Securities Regulatory Commission. It can be said that without Wang Boming and others, there would be no stock market today.
At the same time, the "Joint Office" also created the most important media in the capital market, including Securities Market Weekly, Securities Market Red Weekly, Finance and Economics. To this day, Wang Boming still remains the president of Securities Market Weekly and Caijing.
Wang Boming Baidu Information
Wang Dongming and Wang Boming's father is Wang Bingnan, former Vice Foreign Minister of China.
In this way, two brothers with "red" blood, one in charge of the largest domestic securities firm and the other in charge of finance and economics, have become one of the most influential families in China's financial circle.
The turning point was in 2015, when CITIC Securities experienced an unprecedented earthquake after the stock disaster.
On the evening of August 25 of that year, Xinhua News Agency broke the news that 8 people, including Xu from CITIC Securities, were suspected of illegal securities trading activities and were taken away by the public security organs to assist in the investigation. Several media confirmed that Xu was Xu Gang, the managing director of CITIC Securities.
On the evening of September 15, the news that Cheng Boming, the general manager, had been investigated further hurt CITIC Securities. The next day, Zhang Yujun, the assistant to the chairman of the CSRC, was defeated.
Since Zhang Yujun and Cheng Boming were college alumni after graduation from the same school and Xu Gang, rumors about their "insider trading storm" with CITIC Securities were rife in the market. At that time, the focus of the market naturally fell on Wang Dongming, the soul of CITIC Securities and the chairman of the board of directors for 13 years.
However, although more than 10 senior executives of CITIC Securities were "delivered in one pot", Wang Dongming did not "have an accident", but "retired due to age" that year.
Wang Dongming, who was sadly "retired", did not really have leisure. At the invitation of relevant leaders in Wuxi, the financial godfather joined Guolian Securities as an adviser, and the market saw it as a signal of "making a comeback".
Under the "call" of Wang Dongming, many former departments of CITIC Securities began to turn to Guolian Securities, such as Ge Xiaobo, the former financial director of CITIC Securities, Wang Jie, the former executive general manager of the Human Resources Department, Wang Jinling, the former deputy general manager of the Information Technology Center, Yin Hongwei, the former CEO, and Li Qin, the former chief risk officer.
In particular, the joining of Ge Xiaobo shocked the market.
Ge Xiaobo joined CITIC Securities in 1997 and earned more than 15 million annual salary in 2018, ranking first among senior executives of CITIC Securities, so he also won the title of "Empress of Working" in the financial sector; However, the next year after receiving the annual salary of 10 million yuan, Ge Xiaobo suddenly proposed to leave his job and joined Guolian Securities two months later.
According to the financial report of Guolian Securities in 2019, Ge Xiaobo's salary in the year when he joined was 3.335 million yuan. Even if it was half a year's salary, it was still far from the 15 million yuan of the previous year after being annualized. Industry insiders speculate that Ge Xiaobo mainly reported Wang Dongming's gratitude.
After the joining of "CITIC System", Guolian Securities ushered in a huge turning point.
In December 2019, Guolian Securities announced the resumption of A-share IPO, and the meeting passed quickly within half a year. Previously, Guolian Securities had submitted the prospectus to the CSRC twice in December 2016 and January 2018, and had not made progress in the past three years.
In addition, before the joining of "CITIC System", the performance of Guolian Securities declined year by year.
From 2016 to 2018, the revenue of Guolian Securities was 1.836 billion, 1.263 billion and 0.99 billion respectively, down 40%, 32% and 21.6% year on year; Net profit attributable to the parent company was 610 million, 361 million and 51 million respectively, down 58%, 40% and 86% year on year;
However, in 2019, the year when "CITIC System" concentrated its franchise, its revenue immediately increased by 63%, and its net profit attributable to the parent company increased by an astonishing 930%.
Performance of Guolian Securities
From 2020 to 2021 after the outbreak of the epidemic, the revenue and net profit attributable to the parent company of Guolian Securities can still achieve positive growth, with revenue growth rates of 15.87% and 58.11% respectively; Net profit attributable to the parent company increased by 12.76% and 51.16% respectively.
In the first three quarters of 2022, affected by the deterioration of the overall environment of the industry, the revenue and net profit attributable to the parent company of listed securities companies fell by 21% and 42% respectively; However, Guolian Securities was basically flat, and the year-on-year growth rates of revenue and net profit attributable to parent companies were 0.04% and -2.03% respectively.
In 2023, after the transition period of joining, Wang Dongming is no longer satisfied with the positioning of Guolian Securities. Whether holding a public offering license of 100 billion yuan or the parent company bidding for Minsheng Securities, it indicates that Guolian Securities will "go to the next level", and also declares that Wang Dongming, who is over 70 years old, will make a comeback.
Whether Guolian Securities will become the next CITIC is bound to affect China's financial pattern in the future.
reference material:
Caixin "Guolian Re sold 9.1 billion shares of Minsheng Securities at a high price"
Caixin "CITIC Group Guolian Securities has finally won the public offering license and plans to wholly acquire" Zhongzhi "Zhongrong Fund
Interface news "Wang Dongming Holds" Little CITIC "Guolian Securities for 6 Months to Go Through IPO"
