HSBC in 'exclusive' talks to buy majority Nedbank stake
HSBC revealed Monday that it is in "exclusive" talks with insurer Old Mutual over the purchase of a majority stake in South Africa's Nedbank, as the lender seeks to expand further into emerging markets.
The announcement comes amid a recent flurry of merger and acquisitions activity that has helped spur the British stock market higher during the normally quiet month of August.
"HSBC Holdings plc has entered into exclusive discussions with Old Mutual plc about the possible acquisition of a majority stake in Nedbank Group Limited, South Africa's fourth largest banking group by total assets," Europe's biggest bank said in a brief statement to the London Stock Exchange.
"The discussions are ongoing and if successfully concluded would be conditional on, among other matters, obtaining the necessary regulatory approvals," added Asia-focused HSBC.
Old Mutual revealed in a separate statement that it has received a proposal from HSBC to buy up to 70 percent of Nedbank shares, but did not reveal the price. Old Mutual owns 51.6 percent of Nedbank.
London-listed Old Mutual said that the proposed deal would be a "major step" in its strategy to streamline the group, adding that the proceeds would be reinvested and used to cut debt.
In Johannesburg, Nedbank issued a statement which welcomed HSBC as an "attractive international banking partner" that would enhance its business.
"Nedbank Group's initial assessment of the proposed transaction is that HSBC represents an attractive international banking partner and shareholder of reference and has the potential to provide Nedbank Group with benefits which should enhance Nedbank Group's ability to strengthen its position in the South African banking sector," it said.
"Nedbank Group believes that there is a substantial opportunity for it to expand both within the South African and African markets in due course."
However, it added that there was no certainty that a transaction would be made, and advised shareholders to sit tight pending a further announcement.
HSBC is keen to expand in Africa as part of its ongoing strategy to seek growth in emerging markets, according to a source familiar with HSBC's thinking.
"It's important to remember that this isn't yet a done deal. HSBC has entered exclusivity -- nothing more," the source told AFP.
"HSBC has long talked about the need for a bigger presence in Africa. Securing exclusivity shows its commitment to finding a way of developing its business there."
The source added: "It's further evidence that HSBC management are repositioning the business and exploring opportunities to invest in faster-growing markets.
"HSBC has confidence in the long-term economic and social development of Africa."
The Financial Times newspaper reported that HSBC had fended off competition for Nedbank from British-based emerging markets lender Standard Chartered.
The daily business newspaper, which cited people familiar with the talks, added that HSBC's proposed Nedbank deal could lead to a full takeover offer.
HSBC shares were up 0.84 percent at 639.50 pence in midday deals on London's rising FTSE 100 index, while Old Mutual stock leapt 4.38 percent to 126.30 pence.
HSBC had agreed last month to buy the Indian commercial and retail banking assets of Britain's state-controlled Royal Bank of Scotland.
© 2010 AFP