HSBC Asia Pacific announced yesterday its plan to take Hong Kong’s Hang Seng Bank private in a deal valued at HKD106.1 billion (USD13.63 billion). This move comes after its majority-owned subsidiary faced criticism over its performance and exposure to the weakening property markets in both Hong Kong and mainland China.
HSBC said it will offer HKD155 per share for the 36.5% stake it does not already own, valuing Hang Seng Bank at approximately HKD37 billion.
The offer represents a 30.3% premium over Hang Seng’s closing price of HKD119 on Wednesday, HSBC said.
According to Michael Makdad, senior equity analyst at Morningstar, the transaction marks the largest banking acquisition in Hong Kong in more than a decade, surpassing OCBC’s $5.3 billion purchase of Wing Hang Bank in 2014.
Meanwhile, Citi analysts said in a note, “While the strategic rationale is compelling, and this seems a sensible overall use of capital, we expect investors will question why now and at this price.”
To finance the acquisition, HSBC plans to pause its share buybacks for about three quarters to raise the necessary capital. The deal is structured as a scheme of arrangement under Section 673 of Hong Kong’s Companies Ordinance and values the lender at about HKD290 billion, giving minority shareholders a graceful exit at a premium.
HSBC CEO Georges Elhedery described the deal as a medium- to long-term investment in a leading local bank with a distinctive customer base and strong financial health, emphasizing Hang Seng’s robust liquidity and capital ratios.
Elhedery also said the offer reflects HSBC’s confidence in the Hong Kong market, which remains its most profitable geography and a declared “home market.”
It was also confirmed that Hang Seng Bank will retain its separate brand following the acquisition.
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