HSBC yesterday spent $1.3bn (pounds 800m) buying Bank of Bermuda in a deal that boosts its presence in offshore banking for wealthy individuals.
Continuing this week’s flurry of takeovers and mergers, HSBC will pay for the Bermuda bank in cash from its existing resources.
The acquisition, which is expected to be completed in the first quarter of next year, is the 28th takeover by HSBC in the last 21 months.
It also comes at a time of renewed speculation about deals in the financial services sector, following Bank of America’s $47bn takeover of Fleet Financial in the US on Monday.
HSBC’s shares rose 21.5p to 866p as the transaction was announced, allowing the bank to overtake BP as the country’s largest company by market capitalisation with a pounds 94bn share value. BP was valued at pounds 90bn last night.
Sir John Bond, chairman of HSBC, described the takeover of Bank of Bermuda as an excellent strategic fit. “The ac quisition will significantly enhance our capabilities in some important lines of business,” Sir John said.
As a result of the deal, HSBC will have an additional 5,000 extremely wealthy clients as well as an increased presence in Bermuda, which is often chosen as a base for major hedge funds and US reinsurance companies.
Some jobs are expected to be lost in some of the other off-shore centres where Bank of Bermuda has overlapping operations with HSBC, which has been trying to boost its presence in so-called wealth management.
Analysts at Fox-Pitt Kelton noted that the cash deal was “immaterial in group terms” for HSBC.
“However, it fits with HSBC’s wealth management intentions,” the analysts said.
Under the terms of the deal, Bank of Bermuda will remain at its headquarters in Bermuda and will retain its own board and management.
Its brand will be used in conjunction with the HSBC hexagon and HSBC will also apply for a listing of its shares on the Bermuda Stock Exchange. Shareholders in Bank of Bermuda will receive $45 in cash for each of the shares – $40 from HSBC and a special dividend of BD$5 from Bank of Bermuda.
The deal is the second announced by HSBC this month after it bought the Brazilian operations of Lloyds TSB for $815m.
