JPMorgan’s asset management arm will have to pay a 33 per cent premium to take control of its Chinese joint venture, setting an expensive precedent for other international fund managers as foreign institutions race to tap China’s $5.3tn market.
An exchange filing by JPMorgan’s local partner Shanghai International Trust disclosed a net asset valuation from an external third party of Rmb9bn ($1.3bn) for the JV, China International Fund Management (CIFM). But the filing set a minimum bid price for the 2 per cent stake on auction at Rmb241m, which instead values CIFM at Rmb12bn.
JPMorgan Asset Management declined to comment on the filing by Shanghai International Trust, which is owned by state-run Shanghai Pudong Development Bank. But the US fund manager has previously said it wants to take a controlling stake in the joint venture.
The deal is not yet a sure thing, however, as the deadline for potential bidders to register is July 26. Peter Alexander, managing director of Z-Ben Advisors, a consultancy that advises foreign asset managers in China, said that while JPMorgan would likely enjoy right of first refusal, other foreign and domestic companies would be free to place bids as well.
He pointed to a deal in 2018 in which a 51 per cent stake in a unit owned by Guotai Junan Securities was widely expected to be acquired by China Pacific Insurance without any competition. Instead, a company called Golden Sun Securities came up with its own surprise competing bid, drawing out the process. While the upstart bidder was later disqualified, Mr Alexander warned that in China, “until the deal is done anything can happen”.
Shanghai International Trust revealed in May that it would auction the 2 per cent stake in CIFM this year — a sale to JPMorgan would raise the US company’s stake to 51 per cent while reducing that of its Chinese partner to 49 per cent. It would be the first foreign fund manager to attain a 51 per cent stake in its Chinese JV, although rival Invesco controls its own JV despite a minority holding.
Research group Oliver Wyman has forecast China’s investment market should grow to $9.3tn by 2023, from about $5.3tn now, putting it in second place globally behind the US.