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Guoyuan Securities to go public through 'backdoor listing'

China's Guoyuan Securities Co (國元證券) will become a publicly traded company by acquiring a China Petrochemical Corp (中國石化) subsidiary, the third Chinese brokerage to pursue a so-called ``backdoor listing'' this year.

Guoyuan Securities, based in Anhui Province, will purchase 1.36 billion shares issued by Beijing Huaer Co (北京化二), according to a statement filed with the Shenzhen Stock Exchange yesterday. The brokerage will shift its assets into the new company and Beijing Huaer will sell all its assets to Beijing Dongfang Petrochemical Co (北京東方石化), a unit of China Petrochemical, the statement said.

The maneuver enables Guoyuan to get around a rule requiring Chinese companies to have been profitable for at least three years before going public. China's brokerages, which lost money when the stock market hit a nine-year low in 2005, are seeking backdoor listings to help raise money for expansion in a nation where 46 million trading accounts have been opened this year.

Beijing Huaer's investors will get two Guoyuan shares for every 10 shares they hold. Beijing Huaer lost money in 2005 and last year, and the stock exchange warned the company in March that it faced a possible delisting. The transaction is part of Beijing Huaer's non-tradable share conversion plan, the statement said.

Haitong Securities Co. (海通證券) and Northeast Securities Co (東北證券) have also used backdoor listings to go public this year, as the benchmark CSI 300 Index soared 168 percent. Haitong Securities is raising as much as 26 billion yuan in the biggest share sale by a Chinese brokerage to fund new branches and hiring.
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