South Korea’s Meritz Securities Co. is set to acquire Meritz Capital Co., taking a step closer to become a top-tier investment bank in the country with its equity capital reaching 2.3 trillion won ($2 billion).

The brokerage firm will hold a shareholders’ meeting on Friday to put the plan to buy a 100 percent stake in the sister capital company to a vote. The proposal is highly likely to be approved as the acquisition will help it advance into the large-sized investment banking club in Korea.

It is also expected that almost none of shareholders would oppose the transaction as shares of Meritz Securities finished at 3,760 won on Thursday, 7.95 percent higher than the price at which shareholders can exercise appraisal rights with 3,483 won per share. For now, there is no merit for shareholders including National Pension Service (NPS) holding a 9.47 percent stake to vote against the plan and request the firm to buy back their shares.

The acquisition of Meritz Capital from its parent company Meritz Financial Holding Co. would raise Meritz Securities equity capital to around 2.3 trillion won when combining the 1.87 trillion won equity capital of the securities firm and that of the capital firm with 425 billion won as of the end of last year.

Meritz Securities is urgently need to join the ranks of large-sized investment banks whose equity capital is above 3 trillion won as its investment banking license will expire in 2020. If it becomes a top-tier investment bank, it would be able to separately provide credit to companies as long as it doesn’t exceed 100 percent of its equity capital. If Meritz Securities generates profit of more than 700 billion won over the next four years, it would meet the requirement to become a large investment bank, not a difficult goal to achieve because it recorded 253 billion won in net income last year.

The transaction would also strengthen the governance structure of Meritz Financial Holding as its stake in Meritz Securities would rise from 32.4 percent to 44.5 percent after the sale.

Shares of Meritz Securities closed Friday at 3,815 won, up 1.46 percent or 55 won from the previous session.

By Han Woo-ram

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]