Hong Kong Exchanges & Clearing (HKEX) has confirmed it will acquire a 51% equity stake in Shenzhen-based exchange and regulation technology firm, Ronghui Tongjin Technology.
The exchange said that the deal will support HKEX’s strategy to expand its markets technology capabilities by reducing reliance on third-party vendors and implementation risks, as well as helping manage development costs.
Ronghui Tongjin is a subsidiary of Shanghai-listed Shenzhen Kingdom Sci-Tech, which provides IT services to Chinese securities, asset management, regulatory agencies and integrated finance firms. It has more than 6,000 employees, with 200 of those making up the team at Ronghui Tongjin.
“The global capital markets are being propelled forward by technological developments, and we are very pleased to have signed a letter of intent today with Ronghui Tongjin,” said HKEX chief executive Charles Li. “As committed technology partners, together we will seek to further enhance our existing capabilities, expand our reach and create growth opportunities.”
HKEX added that Ronghui Tongjin also has a strong research and development team within the financial technology space. In the long term, HKEX said that the acquisition will allow the exchange to develop future IT strategic initiatives, as well as tap into new market segments and client bases.
Kingdom’s equity interest in Ronghui Tongjin is expected to fall from 60% to 29.4% upon completion of the deal, while equity interest of the firm’s employees decreases to 19.6% from 40%. The transaction is subject to closing conditions and is expected to complete in the second quarter this year.