[TOKYO] Tokai Tokyo Financial Holdings will buy a 30 per cent stake in smaller Japanese brokerage Ace Securities Co, people with direct knowledge of the matter said, a rare consolidation in an industry struggling to remain competitive.
The owner of midsize brokerage Tokai Tokyo Securities will become the largest Ace shareholder after buying the stake in the privately held Osaka-based firm directly from large shareholders for several billion yen, the sources told Reuters on Friday, asking not to be named as the sale is still private.
A Tokai Tokyo spokesman confirmed the brokerage was considering the purchase. Media officials for Ace could not immediately be reached for comment.
The purchase comes as brokers are trying to boost their assets to rely less on commissions from short-term trading of stocks to defend themselves from market volatilities. But, like Japan's legion of regional banks, the securities industry has resisted large-scale consolidation despite declining profitability.
Individual investors remain reluctant to trade stocks amid sluggish market conditions, hurting earnings at even major brokerages such as Nomura Holdings Inc.
Tokai Tokyo Securities, which has more than 4 trillion yen (S$52.1 billion) in assets, will add Ace's 600 billion yen. Ace owns much smaller broker Maruhachi Securities Co, which has a presence in Nagoya, the home of Toyota Motor Corp and many of its affiliates.
Tokai Tokyo Securities' net profit for the year to March tumbled 32.8 per cent to 12.4 billion yen. Ace Securities net profit for the year to March slipped 54.6 percent to 928 million yen.