In a surprising turn of events, Ant Group Co., backed by Jack Ma, has outbid Citadel Securities LLC for Credit Suisse’s investment bank venture in China. This unexpected move is set to face rigorous regulatory scrutiny due to China’s preference for a foreign buyer in such transactions, according to sources familiar with the matter.
The bid by Ant Group aims to leverage Credit Suisse’s operations to establish a securities business in China. However, the regulatory landscape and the government’s preference for foreign buyers in such deals add an additional layer of complexity to the proceedings.
Credit Suisse was initially granted the investment banking and brokerage license to foster global competition in China’s financial sector. Now, as UBS Group AG, which owns Credit Suisse, navigates the decision-making process, it faces a dilemma between Ant Group’s higher local bid and Citadel’s potentially more government-approved offer at a lower value.
The negotiations are ongoing, and the possibility of other bidders joining the competition remains open, as per one of the sources.
UBS, grappling with challenges in attracting global interest for the unit amid geopolitical tensions and economic uncertainties, must also manage a delicate balancing act with its Chinese partner, Founder Securities. The potential rejection of Citadel’s lower offer by Founder Securities could further complicate the sale process.
Citadel Securities, founded by billionaire Ken Griffin, was the sole global firm to submit a bid, offering around 1.5 billion yuan to 2 billion yuan in late December.
Credit Suisse, seeking approximately 2 billion yuan for the entire China unit, including Founder Securities’ stake, had previously offered to buy out the remaining stake for 1.14 billion yuan before the collapse in March. UBS’s requirement to find a buyer for the Credit Suisse platform stems from regulatory limitations, preventing the holding of two licenses in the same business.
Ant Group’s bid comes in the wake of Chinese regulators concluding a nearly three-year probe into the fintech giant, resulting in a substantial fine in July. The regulatory scrutiny and challenges faced by Ant Group have cost the company, along with Alibaba Group Holding Ltd., over $800 billion in lost valuation.
As the bidding process unfolds, Ant Group’s strategic move could position it to fill a crucial gap in its financial services portfolio, offering the fintech giant the opportunity to extend its footprint from online payments to wealth management and lending.
The regulatory landscape, Ant Group’s restructuring plans, and the outcome of the bid will be closely monitored, as the fintech giant continues to navigate a complex environment, seeking to strengthen its position in the ever-evolving financial sector. Alibaba’s shares, closely associated with Ant Group, experienced a slight decline in Hong Kong trading following this development.
