Meritz Securities Co. captured the 2016 Dasan Financial Award in the Securities Sector after being given credit for its rapid ascent in becoming an investment bank by taking over I’M Investment and Securities in September, 2014, and issuing new shares of the merged investment and securities firm to the tune of l,414.1 billion won.
In August last year, the investment and securities firm took steps to take over Meritz Capital, a sister firm affiliated with Meritz Financial Holdings Co. through the exchange of shares. The deal will be finalized at a shareholder’s meeting scheduled for March and the new investment and securities firm’s capital will be boosted to 2.198 trillion won when the deal is concluded.
Meritz Securities Co. will acquire Meritz Capital Co. from its parent company Meritz Financial Holding Co., a move that will help it move a step closer to joining the country’s top-tier investment banking club.
According to the company, Meritz Securities’ plan to acquire Meritz Capital at 382.6 billion won ($326 million), or 8,857 won per share, was approved at a board meeting on Nov. 17.
The brokerage company will issue new shares to buy its sister capital company and the deal will give Meritz Securities a 100 percent ownership of the capital unit. Meritz Securities also decided to buy back shares for 3,483 won apiece from ordinary shareholders who oppose the transaction.
There will not be a change in management rights after the stock swap, while Meritz Securities and Meritz Capital will be maintained as independent legal entities.
The transaction is expected to help Meritz Securities advance its schedule to reach 3 trillion won in equity capital, a key requirement to be recognized as a top-tier investment banker in Korea. As of Sept. 30, Meritz Securities’ equity capital stood at 1.8 trillion won and will grow to around 2.2 trillion won when the deal is completed.
As of Nov. 17, Meritz Securities shares remained unchanged at 3,640 won per share from the previous session.
Meritz Securities posted a net profit of 287.3 billion won ($235.8 million) in 2015, up 99 percent on year, and an operating profit of 405.1 billion won, up 181 percent. Revenue also jumped 115 percent on year to 3.24 trillion won. All three figures were the company’s record-high.
The stellar performances have sent its return on equity (ROE) 5.1 percentage points higher to 21.3 percent, more than doubling the average 8 percent of eight brokerage houses in 2014. Ths higher ROE underscores its business performance.
On top of new issues to boost its net equity by 60 percent for merger with I’M Investment & Securities last year, better profit bolstered its ROE.
Despite overall sluggishness in local shares, the company was able to make money from corporate financing and real estate-backed financing.
The real estate project finance (PF) division generated an operating profit of 102.1 billion won last year, up 84 percent from a year earlier. With just 26 staff, it raised 1.78 trillion won fund from the high-rise apartment LCT development project in Haeundae, Busan, the highest-ever amount achieved by a local private development PFs. There is downside risk, as the real estate market slows. The project financing could turn sour. The brokerage house is sitting on the largest-ever continent liability worth 4.6 trillion won as of the third quarter. But the company downplayed the concerns, saying when pre-ordered unit sales are counted in, liabilities actually amount to about 3 trillion won.
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