Dongfang Securities Co., Ltd. (ASX: DONG) has made significant progress in its acquisition of Shanghai Securities Co., Ltd., with the total transaction consideration reaching 25.12 billion yuan.
On the evening of July 27, Dongfang Securities released a draft report on the proposed acquisition, detailing plans to purchase 100% of Shanghai Securities through a combination of issuing A-shares and cash payments. The total consideration is set at 25.12 billion yuan.
Specifically, Dongfang Securities intends to issue A-shares to acquire a 50% stake in Shanghai Securities from Bailian Group, a 16.3333% stake from Shanghai International Group Investment Co., Ltd., a 7.6767% stake from Shanghai International Group Co., Ltd., and a 1% stake from Shanghai Chengtou (Group) Co., Ltd.. Additionally, it will acquire an 18.74% stake from Guotai Haitong via share issuance and a further 6.25% stake from the same entity through a cash payment.
Payment Structure and Valuation
Regarding the payment structure, Dongfang Securities will issue A-shares worth 23.55 billion yuan to the five selling shareholders and pay 1.57 billion yuan in cash to Guotai Haitong. The company plans to issue approximately 2.289 billion new shares, representing 21.22% of the enlarged share capital, at an issue price of 10.29 yuan per share. This price is based on the average trading price over the 120 trading days prior to the pricing benchmark date, adjusted for the 2025 dividend distribution. As of the close on July 27, Dongfang Securities' A-share price was 9.08 yuan.
According to an asset appraisal report, as of March 31, the book value of Shanghai Securities' net assets attributable to the parent company stood at 20.121 billion yuan, while the total equity valuation was 25.12 billion yuan, reflecting an increase of 4.999 billion yuan, or 24.85%.
Operational Synergies and Strategic Benefits
As of March 31, Dongfang Securities operated seven securities branches and 163 securities business outlets, wholly owning subsidiaries such as Dongzheng Futures, Dongzheng Capital, Dongfang Jinkong, Dongzheng Asset Management, and Dongzheng Innovation, while also holding a stake in Harvest Fund. Its total assets reached 516.475 billion yuan. Shanghai Securities, with nine securities branches and 72 business outlets, wholly owns Haizheng Futures and Qianhai United Fund, focusing its network on Shanghai and key economic zones including the Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei region, and Chengdu-Chongqing area.
Dongfang Securities stated that post-acquisition, its core business will remain unchanged, but the integration is expected to create synergies, expand asset scale and capital strength, and enhance competitiveness in wealth management, investment banking, and institutional services. This move aims to strengthen its market position and improve its ability to serve the real economy.
Ownership Structure and Regulatory Approvals
Before the transaction, Dongfang Securities had no controlling shareholder, with Shenergy (Group) Co., Ltd. as its largest shareholder. Upon completion, the top five shareholders are projected to be Shenergy Group (20.98%), Bailian Group (11.32%), Guotai Haitong (4.45%), Shanghai International Group Investment (3.7%), and Shanghai International Group (1.74%).
Industry analysts noted that Shanghai Securities is one of only four domestic securities firms with official fund evaluation business qualifications, giving it significant influence in the mutual fund industry. The merger is expected to create synergies, helping Dongfang Securities achieve a more balanced business structure. Additionally, new strategic shareholders like Bailian Group could provide ongoing support in consumer, financial, and technology sectors.
The restructuring still requires approvals from the Shanghai State-owned Assets Supervision and Administration Commission, the Shanghai Stock Exchange, and the China Securities Regulatory Commission.