SHANGHAI (Reuters) – JPMorgan Chase (N:) will pay $1 billion for full ownership of its China mutual fund business, analysts said in a statement on the Shanghai Union Property Exchange on Tuesday, a price analysts said was steep.
JPMorgan Chase’s asset management business will acquire the 49% stake it does not already own in China International Fund Management (CIFM), a move that follows the Chinese government’s decision earlier this year to fully open up the mutual fund industry to foreign firms.
According to a statement from the Shanghai United Property Rights Exchange, where China’s state-owned shares are being auctioned, the price for China Fund’s stake was 7 billion yuan ($1.01 billion).
Z-Ben Advisors, a fund advisory firm, said it pegged the deal at 50 times earnings, a 52 percent premium to fair value.
Z-Ben Advisors said in a note: “Based on numerous metrics, there is no doubt that this is an expensive deal.” Z-Ben said the higher-than-expected valuation reflects the scarcity of opportunities to buy Chinese fund companies outright.
“Is it worth the premium? For JPMorgan Chase, they would obviously say yes.”
JPMorgan Chase & Co. (N:) declined to comment.
China is accelerating its efforts to open its capital markets in light of trade tensions with the United States. Global asset managers including Blackstone (N:) and Neuberger Berman have applied to set up wholly owned Chinese mutual fund units after regulators lifted foreign ownership restrictions in the fund management industry in April.
JPMorgan, which owns 51 percent of CIFM, reached an agreement in April with its Chinese partner Shanghai International Trust Co. to own 100 percent of the fund venture.
Last December, JPMorgan received approval from Chinese regulators to set up a majority-owned securities firm, and in June gave the green light to China’s first fully foreign-owned futures business.
(US$1 = CNY6.9116).
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