Citic Securities Said to Have Mulled Sale of Brokerage CLSA

Updated on
  • State-owned company’s management not currently pursuing a deal
  • Hong Kong has been expansion focus for China securities firms

Citic Securities Ltd., which bought CLSA Ltd. three years ago for about $1.2 billion, considered selling the Hong Kong-based brokerage earlier this year, people with knowledge of the matter said.

Citic Securities isn’t currently pursuing a sale, in part because executives didn’t think they would get an attractive price, according to the people. The state-controlled Chinese firm didn’t want to sell CLSA at a loss, the people said, asking not to be identified because the information is private.

The acquisition of CLSA, known for its independent and sometimes irreverent research, ushered in an era of overseas expansion for Chinese securities firms. Yet analysts said at the time that integrating a company with a markedly different culture could prove a challenge for Beijing-based Citic Securities, the nation’s biggest brokerage.

“The rumor has no basis,” a Hong Kong-based representative for Citic Securities International Co., which owns 100 percent of CLSA, said in an e-mailed response to questions. “Our business integration and cooperation with CLSA have achieved and will continue to demonstrate good momentum.”

Everbright Expansion

Other Chinese brokerages have been doubling down on their operations in Hong Kong, where firms from the mainland have been dominant in advising on initial public offerings this year. Everbright Securities Co., flush with cash from a $1.1 billion share sale, is stepping up its expansion with a slew of hires from competitors, according to people with knowledge of the matter.

Citic Securities itself has had testing times -- and changes at the top. Zhang Youjun took over as chairman in January, replacing Wang Dongming, who retired after 13 years in the role. Wang oversaw the acquisition of CLSA and was at the helm when Citic Securities executives in China became a focus of government investigations that followed last year’s stock market implosion.

CLSA, established in 1986, has about 1,500 staff in 25 offices across Asia, Australia, the Americas and Europe, according to its website.

Brokerages have suffered in the past two years as stock market turmoil put pressure on commissions. In early 2015, CLSA cut about 25 jobs in Asia, mainly in equities, a person with knowledge said at the time. Citic Securities said last month that first-half profit dropped 58 percent to 5.24 billion yuan ($785 million) as trading volumes slumped.

Citic Securities’ first-half earnings report acknowledged a “sharp decline in trading volume and financing activities of major stock markets in Hong Kong and the Asia Pacific region.”

— With assistance by Heng Xie, Vinicy Chan, and Cathy Chan

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