This article first appeared in The Edge Financial Daily on June 7, 2017 - June 13, 2017

KUALA LUMPUR: China Galaxy Securities Co Ltd, one of the largest securities companies in China, is set to become a joint shareholder of CIMB Group Holdings Bhd’s international stockbroking business which spans Indonesia, Singapore, Thailand, Hong Kong, South Korea, India, the UK and the US.

In a filing with Bursa Malaysia yesterday, CIMB said its wholly-owned subsidiary CIMB Group Sdn Bhd had signed a conditional share purchase agreement with China Galaxy International Financial Holdings Ltd to sell a 50% stake in CIMB Securities International Pte Ltd for S$167 million (RM515 million).

“The partnership will see CIMB and China Galaxy becoming 50:50 shareholders in CIMB Securities International,” it added.

CIMB said the purchase consideration was arrived based on a multiple of 1.3 times of CIMB Securities International’s consolidated net asset value of S$256.9 million as at Dec 31, 2015.

“CIMB’s stockbroking business will effectively be repositioned as a pure play broker with the client base of a universal Asean bank. We will continue to offer the full suite of investment banking and capital markets services to our clients, supplemented by the extensive equities distribution platform and research coverage of the joint venture (JV),” said CIMB group chief executive Tengku Datuk Seri Zafrul Aziz in a separate statement.

“The partnership with China Galaxy is a natural fit and we look forward to realising the great synergies of the JV, which also bodes well for the future expansion of our partnership.”

CIMB said with this partnership in the cash equities business, the JV can leverage on China Galaxy’s strengths including its network, market access as well as business and technological know-how, as it is one of the top securities companies in China.

CIMB said the two parties will work towards obtaining the necessary regulatory approvals with a target to complete by the fourth quarter of 2017. “The proposed disposal is expected to contribute positively to CIMB Group’s earnings,” it added.

CIMB and China Galaxy are also in discussions concerning the stockbroking business in Malaysia.

China Galaxy — listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange — operates 360 securities brokerage branches across 31 provinces in China, with over 8.7 million brokerage customers.

CIMB shares dropped one sen or 0.15% to close at RM6.74 yesterday, with a market capitalisation of RM61 billion.