Merrill inks investment bank venture
March 21st, 2005
Last Updated(Beijing Time):2005-01-28 09:33
Merrill Lynch & Co. said Thursday it would own 33 percent of a new Chinese investment banking venture, joining a small but growing group of global investment houses in the mainland underwriting business.
Merrill, which has been looking for a mainland partner for months, said the joint venture with mid-sized brokerage Huaan Securities would have initial registered capital of 800 million yuan (US$97 million).
The breakdown of contributions for the registered capital was not immediately clear.
Big investment banks including Credit Suisse First Boston, UBS and Citigroup are all eyeing potential joint ventures in China to offer domestic stock and bond underwriting services in an economy that grew 9.5 percent last year.
Last month, the Chinese Government gave Goldman Sachs approval to go ahead with its joint venture with veteran investment banker Fang Fenglei.
Morgan Stanley has had a Chinese joint venture for a decade and French banks BNP Paribas and Credit Agricole also have mainland partnerships.
Merrill said the venture would apply for approval to engage in underwriting domestic securities, trading bonds and advising on mergers and acquisitions.
"Our cooperation with Merrill Lynch will allow us to leverage on the global expertise of one of the most reputable investment banks in the world and develop capabilities which allow us to achieve our mutual business objectives," said Wang Yongping, Huaan chairman.
Huaan has 26 branches and registered capital of US$206 million.
Merrill also has a Chinese asset management joint venture with the Bank of China, with its first mutual fund raising a less-than-expected US$130 million in late 2004.
China’s stock markets are a draw to foreign players seeking to tap the country’s US$1.3 trillion in savings and its A-share market, which rivals Hong Kong as Asia’s second largest.
It seems many investment banks are just trying to keep up with competitors — executives say that if their rivals can offer domestic underwriting as a complementary service, they can’t be left behind.
In December, Goldman said it had won approval from China’s securities regulator to set up an investment banking joint venture called Goldman Sachs Gao Hua Securities, in which it will own the maximum allowable 33 percent.
Goldman is lending Fang, the former head of domestic investment banks Bank of China (International) and China International Capital Corp. (CICC), US$100 million to set up Gao Hua and another US$30 million to capitalize it, sources have said.
Legend Holdings, parent of China’s biggest computer maker Lenovo Group , is also taking a stake in the deal.