Power Corp. of Canada has gotten its hands on the highly coveted 10 per cent stake of China Asset Management Co. that went up for sale last month.
Since 2007, China AMC, the country’s largest asset manager, has been owned by CITIC Securities Co., which is China’s biggest publicly traded brokerage firm. However, CITIC has had its hands tied after the Chinese government slapped tough restrictions on the asset manager in January 2010. At the time, China AMC was punished because CITIC’s 100 per cent ownership was more than the 49 per cent that the government decided to allow, so China AMC was banned from offering any new products for two years.
Since that time, China’s regulator allowed new products to be launched and other fund management companies entered the fray. Ultimately CITIC sold down to 51 per cent, but then decided to get rid of its remaining majority stake by selling it in four different 10-per-cent chunks and one 11-per-cent chunk. Four of those would be sold to state-owned enterprises and the fifth to a private company.
Because everybody and their mother wants to get their hands on Chinese companies right now, a competitive bid process was set up. Power Corp. ultimately won that, and will buy a 10-per-cent stake for $276-million (Canadian).
The deal provides Power Corp. with some good access to the Chinese market. China AMC is the country’s largest fund management firm by market share, with approximately $35-billion (U.S.) in assets under management. And not only is it a play on China, but it’s also a play on low risk wealth management, which doesn’t require much capital to create a return.
This isn’t China AMC’s first tie to a Canadian firm. In 2004 the company hired CDP Capital, a Canadian outfit, which consulted on how to handle pension fund management systems.
Power Corp.’s paying cash for the stake.