Goldman Sachs To Acquire Full Control Of China Joint Venture: WSJ

Goldman Sachs Group Inc (NYSE: GS) is reaching out to the Chinese authorities seeking approval for the acquisition of a 100% stake in its China joint venture, the Goldman Sachs Gao Hua Securities Co. (GSGH).

According to the Wall Street Journal, the investment bank has already signed an agreement with the JV partner for acquiring its outstanding stake.

What Happened: If approved, Goldman would be the first global bank operating 100% of its business in mainland China. The wholly-owned unit could be renamed to Goldman Sachs (China) Securities Co, the Journal reports.

Reportedly, Goldman CEO David Solomon, COO John Waldron, along with CFO Stephen Scherr commented in Tuesday’s memo that, “One hundred percent ownership of our franchise on the mainland represents a significant commitment to and investment in China.”

The transaction, subject to approval, could complete in 2021.

Why Does It Matter: While starting in 2004, Goldman held a one-third stake in the joint venture. But earlier this year, in March, Goldman received a nod from China Securities Regulatory Commission (CSRC) to raise its stakes to 51% in GSGH for majority control.

JV Partner, Beijing Gao Hua Securities Company Ltd is a securities trading and private wealth management firm founded by a group of investors led by Fang Fenglei and Legend Holdings.

In mid-January, Bloomberg reported Goldman’s plans to double its headcount to 600 in China as a part of its five-year plan.

Recently, Goldman’s market peers JPMorgan Chase & Co (NYSE: JPM) and Morgan Stanley (NYSE: MS) also bought a majority stake in their Chinese joint ventures.

In November, JPM bought a 20% stake from the state-owned Shanghai Waigaoqiao FTZ, raising its stake to 71%, according to Reuters. Whereas Morgan Stanley’s majority stake purchase in Morgan Stanley Huaxin Securities Company Limited was approved in March.

Price Action: GS stock closed 0.47% lower at $238.45 on Monday.