HONG KONG: Hong Kong listed Taifook Securities said its takeover by Shanghai-listed Haitong Securities could be accomplished within the next two months, and Taifook expects the deal will create business synergy between both brokerages.

Haitong, the second largest brokerage on the mainland by market assets, announced last month its intention to purchase a 52.9 percent stake in Taifook for HK$1.8 billion.

Haitong will become the controlling shareholder of Taifook after the acquisition. It is also the first time that a mainland brokerage will be taking over a Hong Kong securities house.

Speaking after the company's annual general meeting, Taifook's group managing director and chief executive Peter Wong said the acquisition will further enhance the company's business development on the mainland.

"After the acquisition, Taifook will become a subsidiary of Haitong. The deal will also benefit our development in the QFII (qualified foreign institutional investor) program," Wong told reporters yesterday.

He added that Haitong's exposure in the qualified domestic institutional investor (QDII) program will facilitate Taifook's application for a larger quota in the QFII scheme.

Under the QDII program, only qualified mainland investors can purchase shares in overseas securities, while the QFII scheme allows specific foreign institutional investors to invest on the mainland.

Wong said the acquisition is "a win-win transaction", as Taifook will continue to introduce more mainland firms to list on the Hong Kong bourse in the foreseeable future.

"Haitong, as a controlling shareholder of Taifook, may cut back their stake in the company after the transaction, in order to maintain the listing of Taifook in Hong Kong," Wong said.

Haitong will pay HK$4.88 per share to acquire a majority stake in Taifook from NWS Holdings, a unit of property developer New World Development. NWS will retain its 9 percent in Taifook.

Wong said the management team and employees of Taifook will retain their positions, yet he declined to comment whether Taifook will change its name after the transaction.

Market analysts expect the deal may encourage other mainland brokerages to acquire securities houses in Hong Kong, as they seek to expand beyond the mainland.

Jin Xiaobin, board secretary of Haitong, said earlier that the acquisition will serve as an important platform for Haitong to expand in the Asia Pacific, the US and Europe.

US brokerage Citigroup said in a research report that the takeover of Taifook will benefit the business prospects of NWS, as the company can allot more resources to develop other steadier businesses. It also raised the target price of NWS to HK$19 from HK$18 and maintained the "buy" rating.

Shares in NWS yesterday rose 1.77 percent, or HK$0.26, to close at HK$14.98, while Taifook finished up 0.83 percent, or HK$0.04, at HK$4.84.

(HK Edition 12/02/2009 page4)