SHANGHAI/HONG KONG (Reuters) - CITIC Securities has agreed to pay $310.3 million for a near-20 percent stake in French bank Credit Agricole’s (CAGR.PA) CLSA brokerage unit, with an option to buy the rest, underscoring the global ambitions of China’s biggest listed brokerage.
CITIC (600030.SS) has the option to buy the remainder of the brokerage for $910.7 million, which the banks said in a statement they expect it to exercise by June 30, 2013 at the latest.
The Chinese brokerage had planned to buy into U.S. investment bank Bear Stearns during the global financial crisis but later cancelled the deal.
Chinese investment banks including CITIC Securities, China International Capital Corp (CICC) and Haitong Securities Co (600837.SS) are stepping up expansion abroad as growth in the domestic market slows, while China’s growing international clout creates opportunities overseas.
“The investment in CLSA will enable CITIC to partner its strong franchise in China with CLSA’s established global clientele and bring capital market products and services from China to international clients,” CITIC Chairman Wang Dongming said in a statement.
CITIC had said in March it was in talks to buy all of CLSA.
For Credit Agricole, selling CLSA is part of its efforts to refocus on its domestic French retail business and cut back on riskier investment banking and complex financial products.
CITIC Securities had originally wanted to buy a 19.9 percent stake in both CLSA and Credit Agricole’s Cheuvreux brokerage unit, but the two firms adopted a new strategy in March, under which the Cheuvreux transaction was dropped.
CITIC had originally offered $374 million for the stakes in the two brokerages, which would imply a $1.87 billion price for 100 percent of both, some $600 million greater than the price CITIC has now agreed to pay for all of CLSA.
“It’s true that this deal excludes Cheuvreux, while the 2011 deal included it, but it’s hard to imagine that Cheuvreux, which was losing money even then, could represent the 600-some-odd million dollar difference between last year’s price and this year‘s,” said Alphavalue analyst Christophe Nijdam.
“It’s a valuation that’s reasonable but still weaker than at the beginning of the talks,” he added. “It’s true that in the meantime, even CLSA saw its profitability fall in 2011 compared with 2010.”
Credit Agricole shares fell 6.4 percent to close at 3.21 euros, underperforming the European sector .SX7P, which lost 3.7 percent. Credit Agricole’s shares are down 26 percent so far this year, compared with a 4.9 percent sector drop, depressed by concern about its Greek Emporiki unit.
The sale of the two brokerages this week “is a good thing but not glorious,” Nijdam said. “CLSA had been seen as a jewel and they had to pay Kepler to take Cheuvreux. This represents a retreat from Asia for them, part of their retreat to Europe and even to France.”
Additional reporting by Christian Plumb and Matthieu Protard in Paris; Editing by Jon Loades-Carter and David Cowell