Guoyuan has proposed to swap one of its own shares for each 0.67 share of Shenzhen-listed Beijing Huaer Co, the two companies said in a statement.

Beijing Huaer is 58 percent controlled by Beijing Eastern Petrochemical Co, a privately held unit of China Petroleum & Chemical Group, Asia's top refiner.

China's stock regulator is prompting healthier brokers to seek listings by taking over publicly traded firms as the country plans to wrap up a securities-industry revamp by August 31.

Suffering from a stock market downturn that lasted several years, a majority of local brokers failed to post profits for three straight years - a requirement for an initial public offering.

As of last August, the mainland market had only two listed brokers - CITIC Securities Co and Hong Yuan Securities Co.

GF Securities Co in September proposed to buy control of Shenzhen-listed Yan Bian Highway Construction Co, becoming the first domestic broker to go public in almost four years. Sinolink Securities Co, Haitong Securities Co, Northeast Securities Co and Changjiang Securities Co have since announced plans to conduct back-door listings.

Anhui Province-based Guoyuan posted a net profit of 554 million yuan (US$71.7 million) last year, after a loss of 120 million yuan in 2005.

It holds controlling stakes in Changsheng Fund Management Co and Antai Futures Co and has a securities subsidiary in Hong Kong. The broker will join a nationwide program to convert non-tradable stock, controlled by big shareholders, into free-floating entities after the back-door issuance.

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