China Merchants lifts stake in Bosera

CHINA Merchants Securities increased its stake in Bosera Asset Management to 73 percent in a 6.32-billion-yuan (US$854 million) deal, Bosera said in a statement late on Wednesday.

China Merchants paid 130 yuan per share to buy an additional 48 percent of Bosera from Kinghing Trust & Investment Co Ltd.

With the deal, China Merchants also set a record for the biggest purchase of a stake in the fund industry. The previous record was set in October by Shanxi Haixin Group when it paid 1.18 billion yuan, or 56.20 yuan per share, to buy a 21-percent stake in Yinhua Fund Management Co Ltd.

Kinghing Trust & Investment Co Ltd was shut down in 2006 for violating rules and bad management. The securities regulator announced it would auction Kinghing's shares in Bosera on November 19.

"The move shows the ambition of China Merchants to expand and its confidence on the prospect of China's fund industry," said Zhang Qi, an analyst with Haitong Securities Co. "The share price for the deal is a bit high, but it will yield good returns."

Zhang estimated that China's fund industry will remain bullish next year based on the booming stock market.

By the third quarter this year, Bosera's assets under management surpassed 252 billion yuan, ranking No. 1 in China's fund industry. It reported a 155-million-yuan profit in 2006.

"Completing the stake transfer was a big concern," said Bosera in the statement. "With the problem settled, we can now improve the structure of our corporate governance and play an active role in our future development."

China Merchants Securities reported revenue of 2.26 billion yuan last year and a 1.29-billion-yuan profit, ranking sixth among 57 domestic fund management firms.

It is now preparing for an initial public offering. The firm declined to comment yesterday.