J.P. Morgan Chase & Co. needs to pay at least 7 billion yuan ($1 billion) to buy out its counterpart in its Chinese mutual fund business, a pricey premium for the U.S. bank that has ambitions to expand in China's finance sector.
J.P. Morgan's business partner, Shanghai International Trust Co., said it agreed to sell its 49% stake in China International Fund Management Co., which oversees about 150 billion yuan of assets, according to a statement. The price is a 51% premium over the appraised value of the stake. J.P. Morgan announced in April it would gain full control, without mentioning the price.
Global financial firms are rushing to capitalize on China's opening of its $45 trillion financial market, with the likes of J.P. Morgan, Goldman Sachs Group Inc. and UBS Group adding staff and expanding in everything from futures and brokerages to asset management. Most foreign financial institutions have identified wealth management as a prime focus as Chinese households are sitting on about $13 trillion in investable assets.
A representative for J.P. Morgan declined to comment on the price of the stake.
J.P. Morgan Asset Management last year agreed to pay at least 241.3 million yuan to Shanghai Trust in boosting its stake by 2 percentage points to 51%.
CEO Jamie Dimon has said that his firm is committed to bringing its "full force" to China. The bank last year became the first U.S. bank to receive Chinese approval to take majority ownership of a securities joint venture.
CIFM, a 15-year-plus partnership, has been J.P. Morgan's beachhead for tapping the country's growing affluent class, with assets overseen by retail public funds alone projected to reach $3.4 trillion by 2023, according to Deloitte LLP.