HSBC Plans to Privatize Hong Kong Subsidiary Hang Seng
London-headquartered HSBC has announced a plan to privatize Hong Kong-based subsidiary Hang Seng Bank.
HSBC has proposed to privatize Hang Seng Bank for an offer of HK$106 billion ($13.6 billion), according to a statement, valuing the overall Hong Kong-based lender at HK$290 billion. The deal will look to acquire all of Hang Seng’s stock held by minority shareholders at HK$155 per share and delist the bank from the Hong Kong Stock Exchange. HSBC currently owns around a 63 percent stake in Hang Seng.
According to HSBC, the offer represents an «attractive and significant premium to Hang Seng’s historical trading prices, and analyst consensus targets» and is higher than the share’s highest price in three and a half years.
«The Proposal represents a significant investment into Hong Kong, which underlines our confidence in the growth potential for both HSBC Asia-Pacific and Hang Seng. The Proposal will unlock opportunities for further investment and improvements in operational leverage,» the bank added.
Brand to be Retained
The brand of Hang Seng, which is nearly a century old, will be preserved following the acquisition and the bank will also retain its separate authorization as a licensed bank in Hong Kong. At the same time, Hang Seng customers will be able to access the existing offering as well as HSBC’s global network and full product suite.
«This strategic alignment is expected to drive stronger growth by leveraging Hang Seng’s competitive strengths and HSBC’s network and products,» HSBC said.
Balance Sheet Impact
The deal will be fully funded by HSBC with an expected day one capital impact of approximately 125 basis points. The bank said it anticipates restoring its CET1 ratio to its target operating range of 14-14.5 percent through a combination of organic capital generation and not initiating any further buybacks for three quarters.
«Our offer is an exciting opportunity to grow both Hang Seng and HSBC. We will preserve Hang Seng’s brand, heritage, distinct customer proposition and a branch network, while investing to unlock new strengths in products, services, and technology to deliver more choice and innovation for customers,» commented HSBC CEO Georges Elhedery.
«This proposal fully meets our criteria for value-accretive investments: it aligns with our strategy, enhances growth and scale, does not distract us from organic growth, and delivers greater shareholder value than buybacks.»
