Daiwa Capital Markets, the investment bank division of Japanese financial services firm Daiwa Securities Group, will purchase the global convertible bonds and Asian equity derivatives businesses of Belgian bank KBC Group.
The acquisition, which is subject to regulatory approval, is expected to cost Daiwa approximately $1 billion, including $0.2 billion of staff and IT infrastructure assets, as well as KBC Group's trading position, estimated to be worth $0.8 billion.
According to Daiwa, the units it is buying will form part of its strategy to build a global derivatives business based in Asia. As a result of the purchase, Daiwa clients will have access to platforms in the convertible bonds and Asian equity derivatives markets.
KBC's global convertible bonds arm has offices in Hong Kong, London and New York, and says it offers secondary market services for issuers and investors for 350 clients across 25 countries. Its Asian derivatives business, which operates out of Hong Kong, offers market-making services in listed Hong Kong warrants and generates client business from the issuance of equity-linked notes and over-the-counter derivatives based on the equity of Asian companies.
According to figures from the Hong Kong Stock Exchange, KBC's Asian derivatives unit is a top three issuer of Hong Kong warrants and in the top five in terms of trading volume.
The two acquired units will become part of Daiwa's Global Derivatives product line and will be led by Dominique Blanchard, Daiwa's Hong Kong-based global head of derivatives.
“This targeted business acquisition accelerates our development in product lines that we had planned to build up over the coming years, making these businesses an excellent strategic fit,” said Blanchard. “Daiwa will now be home to a highly regarded convertible bonds trading platform that will enjoy synergies with the firm's primary origination business. Our newly acquired derivatives business, meanwhile, will significantly boost our equity capabilities as we build a high quality Asian derivatives platform across rates, fixed income, FX, and equity markets.”
Daiwa announced the strategy to expand its structured products business across Asia in June 2008, when it initiated the process in Japan.