"We are prepared to take additional actions in 2012, if needed," said Piper CEO Andrew Duff.

Jeff Wheeler, Star Tribune

Is a Chinese connection in the works for Piper?

  • Star Tribune staff writers
  • March 1, 2012 - 10:42 PM

Piper Jaffray said Thursday that it plans to remain independent after a report that the Minneapolis investment bank was in talks with a Chinese suitor.

Deal Reporter, a publication that focuses on corporate transactions, said that in addition to an outright sale, a deal could involve a joint venture or the purchase of a significant stake by the unnamed Chinese firm. The report cited an unnamed person familiar with the discussions.

Piper shares, which rose as much as 9 percent during the day, closed at $25.03, up 45 cents.

Piper neither confirmed nor denied the report. In a statement, the firm said it "routinely evaluates corporate development ideas and opportunities" in the ordinary course of business.

"These include possibilities in the Asia market, such as a joint venture, as the company considers alternatives for improving the performance of its small Hong Kong-based subsidiary," it said, while adding that it "intends to remain an independent public company."

Piper, which employs about 1,000 people globally, including 500 in Minnesota, has made expansion in China a priority. In 2007 it bought Goldbond Capital Holdings, a Hong Kong-based investment bank, for about $50 million.

But recently China's economy has been slowing, and in a conference call with industry analysts last month, longtime CEO Andrew Duff said Piper is working to reduce its losses in the region, cutting head count by 15 percent and reducing non-compensation expenses.

"We are prepared to take additional actions in 2012, if needed," Duff said.

Michael Wong, a stock analyst at Morningstar Inc., said the news was somewhat surprising. An outright purchase of a U.S.-based operation by a Chinese securities company would be "counterintuitive," he said, but a joint venture could be a positive.

"A joint venture makes quite a bit of sense because it would accelerate their potential cost savings and profitability," Wong said, adding that Piper's China operation has "stumbled a bit" recently.

With the Chinese market for initial public offerings cooling, it's possible there's overcapacity developing in investment banking there, he said.

Piper's stock price has swung between $16.72 and $43.33 over the past 52 weeks, amid uncertainty about the strength of the U.S. economy, which also determines to an extent the number of corporate mergers and stock and bond offerings.

Piper, which was spun out of U.S. Bancorp after seven years as a subsidiary, regained its independence as a publicly traded company in 2003. In 2006, it sold its big retail brokerage arm of 800 financial advisers to UBS Securities for $500 million in a hot market for the brokerage business, in order to focus on its capital-markets trade.

However, Piper, which also has a strong fixed-income and national municipal finance business, has struggled to compete as a globe-spanning investment bank against bigger players such as Goldman Sachs. And the deal markets still have yet to fully recover from the 2008-09 recession.

Piper Jaffray lost more than $110 million, or $7.38 per share, in the fourth quarter of 2011, compared with a profit of $9.4 million or 49 cents per share a year earlier.

Excluding one-time charges, Piper had fourth-quarter profits of $2.1 million, or 11 cents per share.

Neal St. Anthony • 612-673-7144 • Jennifer Bjorhus • 612-673-4683 •

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