Price Confirmed! Dongwu + Donghai Plan Released, What Changes Will Happen?

Cailian Press, March 13 — (Reporter Lin Jian) “Dongwu + Donghai” strategic integration transaction preliminary plan announced. On March 13, Dongwu Securities issued a notice that the company’s 35th (interim) meeting of the 4th Board of Directors approved the proposal for “Dongwu Securities Co., Ltd. issuing shares and paying cash to purchase assets and related-party transactions,” along with its summary. Previously, on March 1, Dongwu Securities announced its plan to acquire a 26.68% stake in Donghai Securities held by Changtou Group through share issuance.

According to the announcement, on March 13, Dongwu Securities and 61 other shareholders, including Changzhou Investment Group Co., Ltd., signed the “Framework Agreement for Share Issuance and Cash Payment to Purchase Assets.” Dongwu Securities plans to acquire a total of 1,554,487,189 shares held by these 61 shareholders—accounting for 83.77% of the target company’s total share capital—by issuing shares and paying cash. After this transfer, Dongwu Securities’ stake in Donghai Securities will increase from 0% to 83.77%.

Our review highlights six key points:

The final transaction price has not yet been determined, but the issuance price has been set at 9.46 yuan. After the completion of asset-related audits and evaluations, Dongwu Securities will sign a separate agreement with the transaction counterparties to confirm the final transaction price. There are two transaction methods: one is Dongwu Securities paying 92% of the transaction price via share issuance and the remaining 8% in cash; the other is Dongwu Securities paying the entire transaction price through share issuance.

In terms of ownership structure, this strategic integration will lead to dual adjustments, further optimizing the structure. Donghai Securities is controlled by Changzhou Investment Group (which is 90% owned by Changzhou Municipal People’s Government and 10% by Jiangsu Provincial Finance Department). Upon review, Donghai Securities is a brokerage under Changzhou State-owned Assets Supervision and Administration Commission. After the transaction, Donghai Securities’ largest and controlling shareholder will change from Changzhou Investment Group to Dongwu Securities, and the actual controller will shift from Changzhou Investment Group to Suzhou International Development Group.

The purpose and goals of this strategic integration are clear. Dongwu Securities stated in the announcement that advancing the construction of a strong financial nation requires powerful financial institutions to play a key supporting role. Cultivating top-tier investment banks will help serve the development of a modern industrial system and new quality productivity, expand high-level opening-up, and enhance China’s influence in international markets. In the long term, leveraging the integrated resources and capabilities, the securities firm will more precisely serve the industrial upgrading and new quality productivity development of Suzhou, Changzhou, and the entire province, injecting financial momentum into the Suzhou-Wuxi-Changzhou metropolitan area and continuously supporting the implementation of the Yangtze River Delta integration strategy.

This integration is of historic significance. Dongwu Securities’ actual controller is Suzhou International Development Group, which is 100% owned by the Suzhou Municipal Finance Bureau. This strategic integration marks the first case of a merger between securities firms from two prefecture-level cities within Jiangsu Province, representing the industry’s first strategic integration case between state-owned capital securities firms from different cities within the same province—an example of a non-ultimate controlling person merger. Dongwu Securities also stated that the company will continue to work with Donghai Securities and all parties to promote subsequent work in accordance with laws and regulations, ensuring smooth, compliant, and efficient progress.

Personnel arrangements have been planned. The announcement indicates that Dongwu Securities currently has no plans to adjust the employment of Donghai Securities staff. If, within 12 months after the acquisition, adjustments are needed based on actual circumstances, Dongwu Securities will follow relevant laws and regulations to perform the necessary legal procedures and obligations.

Shareholders’ meetings to review this transaction will not be convened for now. This is mainly because the related audits and evaluations are not yet complete. Dongwu Securities will hold another board meeting to review the transaction later, and will follow legal procedures to convene and notify shareholders’ meetings for their review.

Notably, industry opinions suggest that, against the backdrop of accelerated industry transformation, this integration between Dongwu Securities and Donghai Securities also indicates that resource integration among regional securities firms will become an important industry trend.

The issuance price is set at 9.46 yuan

According to the announcement, the final price of the target assets in this transaction has not yet been determined. It will be based on the results of asset valuation reports issued by qualified valuation agencies, approved or filed by authorized state-owned assets supervision departments or their authorized units, and negotiated by both parties through further agreements. Meanwhile, the share issuance price has been fixed at 9.46 yuan, calculated based on the average trading price of Dongwu Securities A-shares over the 20 trading days prior to the pricing date, rounded up to the nearest cent.

The share issuance price has a dynamic adjustment mechanism. If, between the pricing date and the issuance date, Dongwu Securities distributes cash dividends or increases capital through capital reserve transfers, the issuance price will be adjusted accordingly based on relevant formulas.

Additionally, to facilitate the share issuance, the transaction has set differentiated lock-up periods for different counterparties, ranging from twelve to thirty-six months, depending on the nature of the subject, shareholding proportion, and the holding period of the target assets. If regulatory authorities impose further restrictions, the counterparties will make additional commitments as required.

What are the expectations for this strategic integration? Anticipating “1+1>2” synergy effects

Regarding the impact of this integration, Cailian Press initially reported in “First Merger of Securities Firms in the Same Province, Dongwu Securities to Control Donghai Securities, Netizens: Suzhou Securities Breaking the Circle” and has since discussed it extensively.

Currently, the high complementarity between Dongwu Securities and Donghai Securities is the core foundation for realizing synergy effects. Both firms have distinct regional layouts, business structures, and customer resources, forming a complementary pattern. Dongwu Securities adheres to a differentiated development strategy, with strong competitiveness in investment banking, bond underwriting, research consulting, and proprietary trading, establishing a mature business system and market advantages.

Donghai Securities, rooted in Changzhou and deeply engaged in the Yangtze River Delta for years, is a comprehensive brokerage with strengths in wealth management, fixed income, futures, and derivatives, accumulating rich regional customer resources and operational experience. If the transaction proceeds smoothly, the two will achieve deep integration in business layout, resource endowment, and service capabilities, leveraging their strengths to generate significant synergy effects, improve overall operational quality, and create greater value for shareholders.

The impact is mainly reflected in three areas: strengthening net assets, improving overall profitability, and enhancing resource advantages in the Yangtze River Delta.

The strategic integration will solidify Dongwu Securities’ net asset base and improve industry ranking. By the end of the first half of 2025, Dongwu Securities’ total assets and net assets are projected to be 171.9 billion yuan and 43.2 billion yuan, respectively; Donghai Securities’ total assets and net assets are 57.1 billion yuan and 10.3 billion yuan. Post-integration, the combined net assets are estimated at 53.5 billion yuan, elevating the company’s ranking from 18th to 14th among listed securities firms. This will further strengthen the company’s capital strength, aiding business development in a slow bull market.

Dongwu Securities’ strong profitability is expected to empower Donghai Securities. In the first half of 2025, Donghai Securities achieved operating revenue of 815 million yuan and net profit attributable to the parent of 106 million yuan, with year-on-year increases of 38% and 231%, respectively; its annualized ROE was 2.2%, indicating limited profitability. In contrast, Dongwu Securities’ profitability was stronger, with an annualized ROE of 9.1%. In the same period, Donghai Securities’ brokerage, investment banking, asset management, net interest income, and investment income were 325 million yuan, 55 million yuan, 8 million yuan, 90 million yuan, and 294 million yuan, respectively, with growth rates of 48%, -57%, -53%, 10%, and 161%.

Post-integration, the network coverage will expand, and regional resource advantages in the Yangtze River Delta will be more prominent. As of the end of Q1 2025, Dongwu Securities had 30 branches, including 17 in Jiangsu, 3 in Shanghai, and 3 in Zhejiang; 133 securities business departments, mainly in Jiangsu, Zhejiang, and Guangdong. By the end of 2024, Donghai Securities had 17 branches, including 4 in Jiangsu, 3 in Shanghai, and 2 in Henan; 69 business departments, mainly in Jiangsu, Henan, Shanghai, and Zhejiang. The main distribution is in Suzhou, Jiangsu, and Changzhou, Zhejiang.

This strategic integration will help expand branch coverage and improve service density within the province. The Yangtze River Delta region boasts strong resource endowments and economic vitality, and the integration is expected to further tap regional potential, promoting retail, institutional, and corporate client development.