Legend Holdings, the parent company of the world’s largest PC vendor Lenovo, is planning to set up a securities company with third-party payment service provider Lakala and Hong Kong-based brokerage VMS Securities.
The companies will put together RMB 1.5 billion (around USD 217 million) to set up a securities brokerage company based in Beijing’s Zhongguancun, China’s answer to Silicon Valley, according to Lakala’s latest corporate filing.
Legend Holdings will be the controlling shareholder with a 51% stake, injecting RMB 765 million cash in the new company. VMS Securities and Lakala will each take up 25% and 24% stakes respectively.
The proposed new entity, Lianxin Securities, is still in the blueprint and waiting for internal and regulatory approvals. It reveals Legend’s ambition of expanding its finical services, turning itself from a hardware manufacturer to a financial service provider.
Legend, one of China’s earliest private companies found in 1984, has “established a broad presence in the financial searches business,” the company said in its 2018 annual report. The company has also bought a 90% stake in a Luxemburg bank for USD 1.76 billion in 2017.
Financial services, one of Legend Holdings six business segments, booked nearly RMB 7 billion annual revenue and RMB 2.6 billion net profit, accounting for 58.8% of the company’s net profit.
Despite Legend’s ambition, Lianxin Securities still has to cross the hurdle of getting a brokerage license in China.
The Chinese securities regulator has proposed to raise the net asset threshold for controlling shareholders of a securities brokerage, requiring them to have at least RMB 100 billion in net assets. Legend’s net asset was RMB 56.5 billion as of the end of 2018. The proposal to raise the threshold is in draft stage now and has yet to be ratified.
