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CITIC Securities' planned acquisition of GF Securities has encountered strong opposition from GF employees.
Fearing that their interests would be damaged by such a move, more than 2,000 employees of the Guangzhou-based GF Securities spelt out their objections in a letter logged on the web on Monday. Others have even appealed to regulators, after CITIC Securities announced last Thursday that it intends to buy controlling stakes in GF.
CITIC is currently in negotiations with GF's major shareholders over the deal. But a company spokesman said it was hopeful an announcement could be made later this month detailing the results, including prices and the ratio of stake to be acquired.
Although opposition from within the targeted company had placed some obstacles in the path of the plan, analysts said this was unlikely to affect the final result, providing CITIC can reach agreement with enough major GF shareholders to win overall control.
To ease the concerns of GF investors and employees, CITIC issued a notice yesterday, giving assurances that it would respect the rights and choices of the existing shareholders of GF and that the acquisition deal would not affect the independence of GF or lead to any big reshuffle of its operations or labour force.
CITIC maintains the move would enable the two companies to pool resources and supplement each other's advantages.
Both CITIC and GF are in the top class of securities firms in China. Therefore the acquisition is more market orientated, as opposed to the policy dictated ones of the past, when problematic firms were taken over by other businesses or the government directly, said Dong Chen, an analyst with China Securities.
CITIC was the first securities firm to float shares in China, possessing total assets of 13.7 billion yuan (US$1.7 billion) by the end of June.
GF, with a rich network and resources in southern regions, boasts assets of 12 billion yuan (US$1.4 billion). It was also CITIC's lead underwriter during its public offering.
"If GF can be acquired by our company, that is certainly good news for us all because CITIC can become even stronger," said a member of staff at CITIC Securities in Beijing. She said word of the move, which reached her and her colleagues last week, had come as a surprise.
The timing is also good for the acquisition, since the market is low, she said.
But employees with GF, who may have more to lose in the event of a reshuffle post acquisition, had different responses.
Approached yesterday, a GF spokesman declined to comment, other than to say the company had not found an appropriate solution.
However, it is reported that 2,230 GF employees have jointly released a notice online opposing the proposal, branding CITIC's attempted acquisition malicious and arguing that it would not bring any benefits as the two are in fact rivals.
Recently there have been moves towards a management buy-out (MBO) at GF. If CITIC's acquisition move succeeds it will scupper the MBO scheme, an insider said.
Whether CITIC can achieve its plan depends much on the price it offers and the attitude of GF's main shareholders. Opposition from some staff, however, is unlikely to get in the way of an acquisition, said Dong Chen with China Securities.
To some extent, this case is breaking new ground in the securities business because of its market operation model, he said. Regulators also seem in favour of such a move, one which would bring two major securities firms together, thereby making them even stronger.
Source: China Daily
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