Goldman Sachs to acquire 100% of China securities joint venture

Firm is first global bank to seek full ownership of its securities business in the country.

Goldman Sachs is the first global bank to seek full ownership of its securities business in China. Picture: Bloomberg.

Goldman Sachs Group Inc. is moving to acquire 100% ownership of its securities joint venture in China, deepening its investment in the world’s second-largest economy after partnering with a domestic brokerage for 17 years.

The New York-based bank is applying with Chinese regulators to take full control of Goldman Sachs Gao Hua Securities Co. and has signed an agreement to acquire the 49% share of the venture it doesn’t now own, according to an internal memo seen by The Wall Street Journal.

Goldman is the first global bank to seek full ownership of its securities business in China and intends to rename it Goldman Sachs (China) Securities Co. In March, China’s securities regulators approved the firm’s bid to take majority control of the Beijing-based unit.

“One hundred percent ownership of our franchise on the mainland represents a significant commitment to and investment in China,” Chief Executive David Solomon, Chief Operating Officer John Waldron and Chief Financial Officer Stephen Scherr said in the memo dated Tuesday.

Goldman’s venture with a domestic brokerage, Beijing Gao Hua Securities Co., was set up in 2004, with Goldman owning 33% and the Chinese firm owning 67% at the outset. The joint venture handles underwriting of stocks and bonds, and merger and acquisition advisory work in China.

Goldman didn’t say how much it plans to pay for the remaining shares in the China business. As regulatory approvals can take some time to secure, the transaction would likely be completed in 2021. The firm laid out a five-year expansion plan for China late last year and plans to double its head count in the country to 600.

American financial companies, including investment banks, asset managers and credit-card companies, have wanted to expand in China’s giant market for decades but have long been held back by ownership limits on their domestic businesses.

Wall Street has become one of the biggest winners in President Trump’s trade war with China. As part of the trade deal reached in January between the two countries, China promised to give American financial institutions better access to the market.

JPMorgan Chase & Co. and Morgan Stanley have both taken majority control of their local securities joint ventures. The former also has full control of a futures unit in China.

The Wall Street Journal