Chinese brokerage Citic Securities hopes to sell 51% of China Asset Management Co (AMC), the country's biggest fund manager by assets under management (AuM), for at least RMB 7.6bn (€830m).
The deal is necessary to comply with Chinese regulations that forbid any stakeholder from owning more than 49% of a Chinese fund management firm.
Citic bought China AMC in 2007 and the fund manager had RMB 224bn (€24bn) under management in the first quarter of this year. The firm saw revenues increase 9% last year, but suffered a profit drop as labour costs and other prices continue to rise across the industry.
Shanghai-based consultancy Z-Ben Advisors notes that Citic's asking price gives China AMC an implied valuation of 6.6% of its AuM. This is a lower ratio than China Nature, a smaller fund manager which was priced at 7.6% of its AuM in June 2010. But it is a much higher one than fund manager Orient received when Shanghai Chentou recently tried to sell an 18% stake for just 2.2% of its AuM.
Z-Ben says China AMC's asking price is justifiable given that its valuation includes projections for growth. The consultancy adds that China AMC, as the market leader by AuM, is “extremely well positioned in China’s fund management industry”.
Because of its price tag, the China AMC stake is likely to be sold in up to five portions, says Z-Ben.
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