Exclusive: China’s JD.com in talks to purchase stake in brokerage worth up to $1.5 billion – sources

Exclusive: China’s JD.com in talks to purchase stake in brokerage worth up to $1.5 billion – sources

News: Exclusive: China’s JD.com in talks to purchase stake in brokerage worth up to $1.5 billion – sources.

HONG KONG (Reuters) – JD.com Inc is in talks to buy some or all of its stake in Sinolink Securities brokerage worth at least $ 1.5 billion, three people said, as the e-commerce major said its Wants to strengthen financial services businesses.

A deal to buy Sinolink’s largest shareholder, Yongjin Group, would be the biggest bet in terms of the acquisition value of Beijing-based JD.com in the Chinese financial market of $ 45 trillion.

“The valuable broker license is key for tech giants to monetize their huge online traffic and grow into bigger businesses or else they’ll have to route that traffic to other financial institutions,” said one of the sources.

China’s second largest e-commerce company by sales started talks with Yongjin late last year to buy some or all of the 27% stake, said two of the people with direct knowledge of the matter.

Based on Sinolink’s market value of 39 billion yuan ($ 6 billion) on Wednesday, a 27% stake would be worth about 10 billion yuan, according to Reuters calculations.

The potential business comes about because Chinese Tech-Majors are interested in expanding into financial services despite government action against some parts of the sector.

JD.com generates most of its revenue from its core business in e-commerce and has few small financial licenses mainly offering online services such as consumer credit and wealth management products. It’s long been a foray into the fast-growing brokerage industry, said the same two people.

Chengdu-based Sinolink was just outside the top 20 largest brokers in China based on operating revenues in 2019, official data showed. The business includes stockbroking, stock and debt sponsorship and underwriting, financial advice, and asset management.

China’s two leading technology giants, Alibaba Group and Tencent, hold stakes in the country’s leading investment bank, China International Capital Corp. Alibaba has also invested in major broker Huatai Securities, while Tencent has backed Hong Kong-based online broker Futu Holdings.

According to Refinitiv, JD.com has only done two deals in the financial sector to date: its $ 550 million investment in an online automotive financing platform by Yixin Capital in 2016 and another investment in financial services from China Taiping Insurance Holdings worth undisclosed entity in 2018.

The JD.com-Yongjin talks were in the early stages and could change. This warned the sources who, on confidential grounds, refused to be identified.

JD.com, Yongjin, and Sinolink did not immediately respond to requests for comment.

Stricter regulation

For the privately held Yongjin, the potential business would meet its plan to divest its financial services business to circumvent new regulations for financial venture companies, the third person said.

The new rules require a capital threshold for companies that operate more than two types of financial company. Should a company fail to meet the requirement for a one-year grace period, Beijing can force a sale of its shares.

In September, Guolian Securities announced that it would acquire Sinolink through a stock swap and purchase of shares in Yongjin. The merger was later scrapped due to questions about potential insider trading activity.

Yongjin was founded in 1995 by the late entrepreneur Wei Dong and is now run by his wife Chen Jinxia. According to its website, Yongjin has more than 400 billion yuan in assets, of which 30 billion yuan is owned.

($ 1 = 6.4878 Chinese yuan renminbi)

Reporting by Julie Zhu in Hong Kong and Cheng Leng in Beijing; Adaptation by Stephen Coates

Original Source © Reuters

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