Haitong buys Taifook Securities

Shanghai-listed Haitong Securities said yesterday it will buy a 52.86% stake in Taifook Securities from NWS Holdings for HK$1.82 billion ($235 million), triggering an open offer to Taifook's retail shareholders.

Haitong is paying NWS HK$4.88 per share of Taifook. The price represents a premium of 0.62% over the closing price of Taifook on the Hong Kong stock exchange on November 13, the last trading day before shares were suspended. It also represents a premium of 41.79% over the average closing price of Taifook shares for the 30 consecutive trading days up to November 13. The net asset value (NAV) per Taifook share as at June 30 was HK$2.73, so Haitong is paying a 78.75% premium to NAV.

Hong Kong-listed NWS Holdings is the infrastructure and service arm of New World Development Company with businesses spanning roads, energy, water, ports and logistics projects. NWS will continue to own 9% of Taifook.

Taifook is a securities, futures and options trading company which has been in business since 1973. It services institutional investors as well as about 120,000 retail clients through 12 branches in Hong Kong and Macau, two representative offices in Beijing and Shanghai and six investment consultancy centres in Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou and Xiamen. For the 18 months ended June 2009 Taifook earned a net profit of HK$189 million on revenue of HK$1.1 billion.

NWS said it will book gains of HK$700 million before tax from the sale, which is part of its strategy to enhance focus on and free up resources for its infrastructure business.

Taifook will broaden its retail brokerage client base from mainland China, creating opportunities for Taifook's asset management and corporate finance businesses, NWS said.

Haitong said the deal offers it the opportunity to establish a sizeable customer base and distribution network in Hong Kong.

Haitong is valuing 100% of Taifook's equity at HK$3.5 billion ($445 million), based on Taifook's current issued share capital. The deal triggers a general offer to Taifook shareholders at the same price. Taifook also has 24 million options outstanding. Assuming all shareholders tender their shares in the open offer, all options are exercised and Taifook issues 13.6 million shares as a final dividend for 2009, Haitong's outlay will be a further HK$1.8 billion. Hai Tong (HK) will make the open offer and has appointed HSBC lead manager to that part of the deal. NWS worked with BOCI and Clifford Chance.

Haitong intends to maintain Taifook's listing and will take steps to ensure that a freefloat of 25% of Taifook shares are held by the public in case it corners more than 22% of the retail shareholding in the open offer. The deal is subject to approval by the Hong Kong regulator, the Securities and Futures Commission.