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Chinese security firm to buy CLSA Asia-Pacific

By Fang Yunyu (Global Times)

08:40, July 23, 2012

Citic Securities Co has announced it will buy Hong Kong-based brokerage CLSA Asia-Pacific Markets from France's Credit Agricole SA for $1.25 billion, but experts warned Sunday that Chinese companies should be aware that overseas buying may carry some business risks.

Citic Securities, the country's largest brokerage by market value, said the deal would be carried out in two steps by its subsidiary Citic Securities International Company, of which the first step is the purchase of a 19.9 percent stake in CLSA for $310.3 million, and the second an option buying of the remaining 80.1 percent stake for $941.7 million.

"Chinese companies that want to expand overseas need to do due diligence first about the local situation," Lu Qianjin, a professor specializing in global finance studies at the Fudan University, told the Global Times, noting that some companies have suffered difficulties in running their overseas businesses due to different legal conditions and worker union environment.

China incurred a net loss of $26.8 billion from its overseas investments as of last year, as domestic companies failed to do adequate risk control in their overseas businesses, the China International Council for the Promotion of Multinational Corporations said on June 24,

Zhou Zhongshu, vice president at the council, said Chinese companies need to be more cautious while looking for mergers and acquisitions (M&A) in overseas markets and simply buying technology can not significantly improve the strength of domestic companies.

However, Lu said that Europe's continuing sovereign debt storm also created an opportunity for Chinese companies, which hold huge amounts of capital, because "many companies in Europe are short of funding due to the eurozone crisis."

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