Battle over brokerage acquisition heats up

Employees of China¡¯s seventh-largest brokerage intended to buy a stake in their own company to fight a potential acquisition by rival CITIC Securities, financial newspapers reported Friday.

An increasingly bitter battle between CITIC and employees of GF Securities is threatening to derail the first major market-driven acquisition in a struggling sector.

It is rare also for employees to take strong action against an acquisition attempt by a listed company, signalling improving accountability to investors and employees in the country¡¯s corporate sector.

CITIC, China¡¯s first brokerage to issue shares, said two weeks ago it would buy a stake in same-sized GF. But more than 2,200 of 2,500 GF staff members protested against the move in an open letter last week, calling it a ¡°hostile takeover¡± and citing differences in management styles and corporate culture.

Now, employees at GF Securities had set up Shenzhen Jifu Venture Capital Investment Co. to buy a 3.83 percent stake in GF held by agricultural chemicals maker Yunda Science and Technology Co., also known as UNIDA, the newspapers said.

Jifu would pay 88.88 million yuan (US$10.74 million) for the stake, according to a statement posted by UNIDA in newspapers.

¡°This is the first shot fired in a battle between CITIC and GF over the acquisition,¡± the Shanghai Securities News reported.

The bulk of GF stakes lies in the hands of several Chinese listed companies, including textile trade firm Liaoning Chengda Co.

Analysts say CITIC, the trading arm of China International Trust and Investment Corp., the country¡¯s largest financial conglomerate, intended to be a controlling shareholder.

The government is encouraging local players to seek mergers and acquisitions to fend off competition from foreign peers such as BNP Paribas and Credit Lyonnais Securities Asia, which have set up ventures to tap a growing pipeline of stock offers.

But it typically asks better-managed firms to take over waning peers to avoid market volatility sparked by closures.

Source: Shenzhen Daily-Agencies