Citic Securities Co., China’s largest brokerage by market value, and France’s Credit Agricole SA are nearing an agreement to form a global brokerage venture, including China and the Asia Pacific region, said four people with knowledge of the matter.
The alliance would include assets worth more than 3 billion euros ($4 billion), one of the people said, declining to be identified before an announcement that may come today. It involves CLSA Asia-Pacific Markets, 65 percent owned by Credit Agricole, forming a Chinese joint venture in stock sales and institutional broking with Citic Securities, the people said.
Teaming up with Citic Securities, which has ranked first or second in China since 2006 in underwriting stock sales, will help CLSA leapfrog rivals including Goldman Sachs Group Inc. in the world’s fastest-growing major economy. Partnering with CLSA, rated Asia’s best brokerage in Asiamoney’s 2009 survey of institutional investors, may boost Citic Securities’s attempts to expand outside China.
“It seems Citic is teaming up with a strong partner in the Asia Pacific region, speeding up its international plan,” said Liang Jing, a Shanghai-based analyst at Guotai Junan Securities Co. “Over the long term, it’s definitely a favorable step.”
Citic Securities suspended trading of its shares in Shanghai on April 16, saying it’s holding “important” talks.
Under the plan, Credit Agricole would sell a stake in CLSA in exchange for a share of the new company, which will be partly owned by Citic, two of the people said. Citic Securities and Credit Agricole’s corporate and investment bank plan to announce a memorandum of understanding today, they said.
In China, Beijing-based Citic would replace Hunan-based Fortune Securities Co. as the domestic partner for CLSA, two of the people said. Citic Securities, whose parent is controlled by China’s cabinet, got 99 percent of operating profit from the country last year.
Citic Securities and CLSA have been in talks about an alliance for more than two years, one of the people said.
Raymond Tang, a spokesman at Citic Securities, and Anne- Sophie Gentil, a spokeswoman for Credit Agricole, France’s largest bank by branches, declined to comment. Fortune Securities officials couldn’t be reached.
CLSA would take over Citic’s international and Hong Kong businesses over time, the people said, declining to give a timeframe. Citic’s stake in CLSA will give it access to the Hong Kong-based broker’s global distribution network, one person said.
CLSA, founded in 1986, has more than 1,350 workers and focuses on equity and economic research, trading and asset management. It also advises on stock sales and mergers. CLSA expanded its U.S. operations and opened a business in Australia since early 2009. Management holds 35 percent of the brokerage.
The firm’s venture with Fortune Securities won regulatory approval in June 2008 to trade shares in China, whose stock market is the world’s third-largest by capitalization, according to Bloomberg data.
The Chinese venture, called Fortune CLSA Securities Ltd. is one-third owned by CLSA. CLSA will own the same stake in the new venture with Citic Securities, which will include yuan- denominated stock underwriting, institutional broking and research in China, one of the people said.
Citic Securities’s brokerage was 14th last year in trading shares and mutual funds in the country, according to the Securities Association of China. The ranking excludes its 60 percent stake in China Securities Co., which Citic has been ordered by the securities regulator to sell.
Fortune Securities ranked 61th among Chinese brokers last year.
Citic Securities International Co., based in Hong Kong, had assets of 5.17 billion yuan ($757 million) at the end of last year. Profit at the division more than tripled in 2009, to 181.3 million yuan, according to Citic Securities’s annual report.
Citic Securities’s planned $1 billion cross-investment with Bear Stearns Cos. fell apart in March 2008 as the Wall Street firm teetered on the brink of collapse and was forced to sell itself to JPMorgan Chase & Co.
Walker and Coull
CLSA was initially created as a venture between Hong Kong retail brokerage Winfull Securities and the U.K. stockbroker Alexanders Laing & Cruickshank Securities in 1986. Laing & Cruickshank hired journalist-turned stockbroker James Walker to set up an institutional brokerage for the venture. Walker was later joined by Gary Coull, his former journalist colleague.
Laing & Cruickshank was acquired by Credit Lyonnais in October 1987. Credit Lyonnais Securities Asia was formed in 1990 after it was separated from the venture with Winfull, and focused on wholesale broking in the region.
Walker died of cancer in 2004, at the age of 55. The same disease claimed Coull, then 52, two years later. CLSA’s management and staff now own 35 percent of the company.