Citic Securities Co., China’s largest brokerage by market value, agreed to buy Credit Agricole SA’s CLSA unit for $1.25 billion, joining banks across Asia acquiring the assets of troubled European financial firms.
Citic Securities completed its purchase of a 19.9 percent stake in the brokerage for $310.3 million, the companies said in a statement Friday. Citic Securities will buy the remaining 80.1 percent of Hong Kong-based CLSA for $941.7 million subject to conditions including regulatory approval, the companies said.
Chairman Wang Dongming entered exclusive talks with Credit Agricole in March over the French bank’s remaining CLSA stake to add overseas research, brokerage and investment banking to Citic Securities’s operations. Credit Agricole shares have plunged 28 percent this year as European banks including HSBC Holdings Plc and Royal Bank of Scotland Group Plc shed assets to cope with the region’s debt crisis. Shares of Beijing-based Citic have jumped 9.3 percent since their October debut in Hong Kong.
“This is a symbol of European banks’ retreat,” said Christophe Nijdam, an analyst at AlphaValue in Paris who recommends buying Credit Agricole shares. “CLSA was considered a jewel.”
CLSA has more than 1,500 employees in 20 locations spanning 13 countries providing equity research, trading, asset management, and advising on stock sales and mergers, according to its website. The firm’s research business covers about 1,000 companies listed in 12 Asia-Pacific markets and includes its New York-based Calyon Securities unit in the U.S. where it covers more than 200 stocks, according to the website.
Chief Executive Officer Jean-Paul Chifflet is trimming Credit Agricole’s balance sheet and cutting costs amid higher capital demands from regulators and a decline in trading and underwriting commissions. The bank, based near Paris, this week entered exclusive talks to sell its other brokerage, CA Cheuvreux, to Kepler Capital Markets SA.
Credit Agricole declined 6.4 percent to 3.21 euros in Paris on July 20, giving France’s third-largest bank a market value of about 8 billion euros ($9.7 billion). Citic Securities fell 3.9 percent to HK$14.54 in Hong Kong.
Citic Securities aims to complete the deal on the remaining 80.1 percent CLSA stake by the middle of next year, the companies said. The firm plans to develop cross-border business through CITICS International, it said in the statement. Citic Securities, founded in 1995, is controlled by the state-owned Citic Group, which is backed by China’s Cabinet.
CLSA, founded in 1986, was bookrunner on 150 deals raising more than $22 billion from 2005 to 2010, according to its website. It became a wholly owned subsidiary of Credit Lyonnais SA in 1990. Credit Lyonnais merged with Credit Agricole in 2003.
Credit Agricole’s corporate- and investment-banking unit owns 65 percent of CLSA, with the broker’s staff owning 35 percent. CLSA will keep the existing independent structure of its management team, according to the statement.
Sumitomo Mitsui Financial Group Inc., Japan’s second- biggest bank, Malaysia’s CIMB Group Holdings Bhd. and KB Financial Group Inc., owner of South Korea’s largest bank, are also among Asian buyers of European financial firms’ assets this year.
In January, Sumitomo Mitsui said it would buy RBS’s aviation unit for $7.3 billion gaining control of a 206-plane fleet. Koichi Miyata, president of Sumitomo Mitsui, plans to buy “several hundred billion yen” of assets being sold by European lenders, he said in an interview in December.
KB Financial Group Chairman Euh Yoon Dae last week said his company plans to bid for ING Groep NV’s South Korean life insurance business. CIMB, Southeast Asia’s top-ranked investment bank over the past three years, agreed in April to buy most of Edinburgh-based RBS’s investment banking and cash equities businesses in the region for $142 million.
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