Hong Kong-based broker Guotai Junan in talks to acquire majority stake in Vietnamese company

Maria Nikolova

The consideration for the possible acquisition will be determined through negotiations and will be settled in cash.

Prime of prime relationships and the future

Hong Kong-based online trading company Guotai Junan International Hold. Limited (HKG:1788) has just confirmed that it is looking at expanding its presence in Southeast Asia via a deal in Vietnam.

In an announcement filed with the HKEX today, the broker said it is in active negotiations in relation to a proposed acquisition of a majority interest in a company in Vietnam. The name of the target company was not specified but the broker said the Vietnamese company is principally engaged in the provision of financial services.

The consideration for the possible deal will be determined through negotiations between Guotai Junan and the target company on an arms’ lengths basis, and will be settled in cash.

The Board of Guotai Junan considers that the possible acquisition (if materialised) will enable it to further expand its business presence in Southeast Asia following its establishment in Singapore, which allows the Group to seize opportunities under the “One Belt, One Road” initiative adopted by the PRC government and will be beneficial in maintaining the Group’s international competitiveness and enhancing its reputation.

The Board notes that no legally binding agreement in relation to the possible acquisition has been entered into as at the date of today’s announcement. The possible deal may or may not proceed and is subject to, among other things, due diligence review on the assets, liabilities, operations, financial and legal affairs of the target company by Guotai Junan to its satisfaction, as well as to further negotiations between the companies, and necessary approvals.

Let’s recall that Guotai Junan realized profit after tax of HK$1,336 million in 2017, up 30% from the 2016 result. In particular, the income from financial products and corporate finance witnessed a significant increase of 162% and 50%, respectively.

Also, in 2017, the revenue generated from loans and financing, corporate finance, financial products, market making and investment income contributed approximately 41%, 22% and 20%, respectively. The overall business capabilities of the group have been steadily enhanced.

The brokerage segment saw steady growth as it benefited from various positive factors including the year-on-year increase in the average trading volume in Hong Kong. Revenue generated from the brokerage business increased steadily by approximately 32% year-on-year to HK$517 million in 2017.

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