The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Robyn Mak
HONG KONG, April 29 (Reuters Breakingviews) - Ant 688688.SS is returning to Hong Kong. Five years after regulators derailed the fintech group's blockbuster initial public offering in the city, the Jack Ma-founded outfit is taking control of a local retail brokerage. Beijing has yet to give its blessing for the $80 billion payments-to-wealth management group to revive any listing plans but this may be a first step to a full comeback after a painful downsizing.
The small $362 million acquisition marks the company's first foray into the securities brokerage business. As part of the deal, a vehicle owned by Ant will buy a nearly 51% stake in Bright Smart Securities & Commodities 1428.HK from the company's chair. Revenue and earnings are shrinking at Ant's target which is lagging in a fiercely competitive sector against slick rivals including $9 billion Futu. As the owner of super-app Alipay, Ant looks well-placed to revamp Bright Smart's portal to appeal to a younger demographic.
What Ant gets is a bit fuzzy. It's entering the market as investors rediscover some appetite for Chinese equities; Hong Kong's benchmark Hang Seng Index is up 10% this year and two stock listings launched in the city on Monday. The ultimate prize may be the mainland's $1.7 trillion brokerage industry. To access that, Ant will need to apply for or acquire a separate Chinese license. The Bright Smart acquisition gives the Alibaba-backed 9988.HK fintech giant a chance to dip its toe into stock trading in the meantime.
Either way, the purchase led by new CEO Cyril Han marks the start of a fresh chapter. Ant was a prime target in Beijing's crackdown on the "reckless expansion of capital". Today the fintech group, which in 2023 offered to buy back some shares at roughly a quarter of its touted $300 billion-plus IPO valuation, resembles less of a bank and acts more like a middleman connecting users with financial products and services. It folded its once fast-growing consumer lending operations into an entity it only owns 50% of, for example.
Bright Smart's stock has surged 70% above the price Ant is paying for its stake, perhaps reflecting investors' hope that the deal will pave the way for a so-called backdoor listing for the buyer. That seems like some wishful thinking. For now, Ant is only starting on a long march.
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CONTEXT NEWS
China's Ant Group has offered to buy a 50.55% stake in Hong Kong-based brokerage Bright Smart Securities & Commodities from the company's chair, according to a stock exchange filing on April 25.
As part of the deal, Ant will pay roughly HK$2.81 billion ($362 million) for the stake, representing a 23.8% premium to the stock's 60-day average price. Ant intends to maintain Bright Smart's stock exchange listing and will focus on growing the target's business.
Investors are betting on Ant's big comeback https://www.reuters.com/graphics/BRV-BRV/zdvxagwmkpx/chart.png
(Editing by Una Galani and Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on MAK/ robyn.mak@thomsonreuters.com))
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