JPMorgan to pay US$1b for full ownership of China mutual fund JV

[SHANGHAI] JPMorgan is to pay US$1 billion for full ownership of its Chinese mutual fund venture, a statement on the Shanghai United Asset and Equity Exchange said on Tuesday, a price tag that analysts said was expensive.

JPMorgan's asset management business is to buy the 49 per cent stake it does not already own in China International Fund Management (CIFM), a move which follows Beijing's decision earlier this year to fully open up the mutual fund industry to foreign companies.

The CIFM stake is priced at 7 billion yuan (S$1.38 billion), according to the statement on the Shanghai United Assets and Equity Exchange, where Chinese state-owned equities are auctioned.

Fund consultancy Z-Ben Advisors said that pegged the deal at 50 times earnings, and represented a 52 per cent premium over fair value.

"Based on numerous metrics, there is no question that this is an expensive deal," Z-Ben Advisors said in a note. The higher-than-expected valuation reflects the scarce opportunities for buying a Chinese fund house outright, Z-Ben said.

"Is it worth the premium? For JPMorgan they'd clearly say yes." JPMorgan declined to comment.

China is opening up its capital markets at a faster pace given trade tensions with the United States. Global asset managers including BlackRock and Neuberger Berman applied to set up fully-owned China mutual fund units after regulators in April scrapped foreign ownership restrictions in the fund management industry.

JPMorgan, which owns 51 per cent of CIFM, in April reached an agreement with its Chinese partner, Shanghai International Trust Co, for 100 per cent ownership of the fund venture.

Last December, JPMorgan won Chinese regulatory approval to establish a majority-owned securities venture, and in June got a green light for China's first fully foreign-owned futures business.

REUTERS