(Yicai Global) Sept. 21 – China's Guolian Securities is planning on merging with a larger brokerage peer, Sinolink Securities, to create a financial behemoth worth nearly CNY100 billion (USD14.8 billion). Both of the firms' shares surged.

Guolian Securities would issue new equity to all of Sinolink’s stockholders and purchase a 7.8 percent stake in the latter from its controlling shareholder, privately owned Yongjin Group, the Wuxi-based bidder said in a statement yesterday. The target firm confirmed that its parent is considering selling the stake. They didn't reveal pricing or delivery details.

Guolian's stock price [HKG: 1456] rose 47.9 percent to HKD5.28 (US 68 cents) in the morning session. Both of the firms' mainland-listed shares were suspended today after rising by the daily limit of 10 percent during the previous trading day.

The deal could best be described as a snake swallowing an elephant, according to market analysts.

Chengdu-based SInolink's assets tallied CNY65.4 billion (USD9.7 billion) by the end of June, nearly twice that of Guolian, according to public data. Sinolink's revenue was CNY2.9 billion (USD429.2 million) in the first half while its peer had CNY822 million )USD121.6 million).

Moreover, the bidder is backed by a state-owned entity. Guolian Development Group, which is a unit of Wuxi’s State-Owned Assets Supervision and Administration Commission, is the biggest shareholder of the brokerage, with a more than 72 percent stake.

Yongjin is Sinolink's largest shareholder with an 18 percent stake, followed by Yongjin Investment.

Sinolink's shares [SHA: 600109] stood at CNY15.29 (USD2.30) today and Guolian's equity [SH:601456] was at CNY19.64. Guolian got listed on China’s mainland two months ago. It floated its shares in Hong Kong in 2015.

Editor: Emmi Laine