China I-Banks Zero In on Piper Jaffray 中国投行聚焦美国派杰

By newsdoug on March 2, 2012

Piper Jaffray: Reluctant bride for a Chinese suitor I’ll start off this Friday with a couple of interesting items on Sino-foreign tie-ups involving financial firms, one involving Piper Jaffray (NYSE: PJC), a boutique US investment bank with a history in China, and the other involving another US firm in a new partnership with UnionPay, China’s dominant electronic transaction specialist. Let’s look at Piper Jaffray first, as that’s the most intriguing of the 2 developments, with shares of the company jumping as much as 10 percent after US media reported it had been approached about a buyout from an unnamed Chinese company. (English article) Piper Jaffray responded with a statement saying it intends to remain independent for now, cooling down its shares which ultimately ended up a more modest 2.6 percent in Thursday New York trade. (company statement) As a US-based niche player with a relatively modest market cap of $500 million and a decade of experience helping Chinese tech companies go public in the US, Piper Jaffray does indeed seem like the perfect acquisition target for a Chinese financial company looking to expand its reach abroad. Potential Chinese buyers would include Bank of China (HKEx: 3988; Shanghai: 601398) and ICBC (HKEx: 1398; Shanghai: 601398, as well as CICC, the nation’s largest investment bank, all of which have signaled they would like to expand their investment banking activity abroad. Piper Jaffray’s lack of denial means it has probably been approached by one or more of these players, and I expect this story isn’t finished yet, with potential for a bidding war to break out. Meantime, another US company named WorldPay has signed a deal that will allow Chinese buyers to purchase goods in the US and most of Europe over the electronic payments network operated by UnionPay, China’s dominant player in electronic financial transactions. (company announcement) This deal looks interesting as much for UnionPay as it does for WorldPay, as it opens up huge new possibilities for Chinese merchants to purchase goods from sellers in the US and most of Europe — something that is now difficult for most Chinese firms due to China’s strong currency controls. UnionPay has been aggressively expanding abroad through a number of tie-ups with major banks in recent years, but this is one of the biggest e-payments deals to date, and I suspect it will be followed by more in the year ahead. This rapid build-up is undoubtedly being encourage by Beijing, and I predict we will see an IPO, most likely in Hong Kong and Shanghai, for UnionPay either this year or next, providing an interesting alternative for investors who want to buy into China’s financial services sector with the risk of owning shares of a big state-run bank.

Bottom line: A bidding war between Chinese buyers could soon erupt for investment bank Piper Jaffray, while UnionPay’s new US tie up is the latest step in an accelerating global expansion.

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