JPMorgan could become the first foreign company to own a majority stake in its Chinese mutual fund business, after its joint venture partner put up 2% of their business up for sale.
Shanghai International Trust revealed it would auction the stake in China International Fund Management in a statement to the Shanghai United Assets and Equity Exchange on Wednesday. Analysts expect JPMorgan to swoop up the offering.
Under the latest rules, announced in late 2017, foreign asset managers can own up to 51% of their Chinese mutual fund joint ventures, but, so far, no company has managed to do so.
While it looks as though it’s a pretty straightforward process, it’s still a public auction and this is China, anything can happen"
J.P. Morgan Asset Management (JPMAM) currently owns 49% of China International Fund Management (CIFM), while Shanghai International Trust, belonging to Shanghai Pudong Development Group, owns 51%.
Peter Alexander, managing director of Z-Ben Advisors, a consultancy that advises foreign asset managers in China, said he was optimistic a purchase by JPMorgan could be approved relatively quickly. But he cautioned it was not guaranteed.
"While it looks as though it's a pretty straightforward process, it's still a public auction and this is China, anything can happen," he said.
Alexander added he had "a high conviction level" that JPMorgan will be the buyer and that the purchase price will be watched closely, as it will offer a guidance on the "premium" foreign firms need to pay for control of a Chinese fund venture.
The open bidding process begins on May 8, and will continue until June 4.
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