Brokerage will also set up venture with China's second-largest futures broker
Sun Hung Kai Financial will pay more than $4 billion to buy out the entire 50 per cent stake of privately held United Asia Finance from its parent firm Allied Group as part of its strategy to enter the mainland securities market, sources familiar with the deal said.
Besides this deal, Sun Hung Kai - the largest and oldest local brokerage firm with a market share of more than 10 per cent - today will sign an agreement with China's second-largest futures broker, Zhejiang Yongan Futures Brokerage, to set up a 25-75 joint venture, China Xin Yongan Futures, in Hong Kong with the mainland firm taking the larger stake.
The deal will be the first to allow a mainland futures broker into the Hong Kong market.
'Both deals are significant steps for Sun Hung Kai Financial to expand into the mainland market, which will be the future growth area of the Hong Kong brokerage industry,' a source said yesterday.
Brokers in Hong Kong face fierce competition from banks, which offer low commission fees to attract clients, forcing smaller outfits to the wall while larger brokerages such as Sun Hung Kai, Tai Fook Group and Christfund Securities have had to expand into China to seek new opportunities.
The source said Sun Hung Kai would pay more than $1 billion in cash and the rest in the form of deferred debt papers to Allied Group for 50 per cent of United Asia Finance, a licensed money lender focused on personal finance. The deal will increase Sun Hung Kai's stake in UA Finance from 8 per cent to 58 per cent while its other Japanese owners will retain their stakes.