(Yicai Global) May 27 -- Hua Chuang Securities has paid CNY1.7 billion (USD253 million) at auction for just over 10.9 percent of Pacific Securities, following a lengthy court battle, setting it up to become the second-largest broker in southwest China.

Hua Chuang bought 744 million of the Shanghai-listed brokerage’s shares in the court-sanctioned auction, making it the largest shareholder, Pacific Securities announced today. Hua Chuang was the only bidder.

This was the second time that Hua Chuang had tried to buy a stake in Pacific Securities. The Guiyang-based company failed in a bid three years earlier. If it completes the purchase this time, it will become the second-largest securities firm in China’s southwest after Sinolink Securities, based on last year’s revenues.

In 2019, Hua Chuang paid a deposit of CNY1.5 billion to Beijing Jiayu Investment, the biggest shareholder in Pacific Securities. The transaction foundered, but Jiayu Investment did not return the deposit or related interest, so Hua Chuang filed a lawsuit.

The shares were put into a judicial auction. The settlement price was CNY2.32 per share, while the proposed price in the aborted deal in 2019 had been CNY5.5.

The purchase still needs approval from regulators, as it would lead to a change in Pacific Securities’ largest shareholder.

Hua Chuang has had far better earnings than Pacific Securities recently, with revenue of CNY3.7 billion and a net profit of CNY1.2 billion last year, while Pacific Securities notched up revenue of CNY1.6 billion and a net profit of CNY121 million.

Hua Chuang had 97 branches in its home province of Guizhou as of the end of 2021. Pacific Securities has 78 securities branches in China, including 33 in Yunnan province.

After surging over 7 percent in trading this morning, shares of Pacific Securities [SHA: 601099] closed at CNY2.84 (42 US cents) each, unchanged from yesterday.

Editor: Tom Litting