HSBC Holdings plans to privatize Hang Seng Bank, with a bid price of HK$155 per share, 30.3% higher than the closing price on the previous day. If the privatization proposal is implemented, Hang Seng Bank’s 53-year listing status on the Stock Exchange of Hong Kong will be revoked.
On the morning of October 9, Hang Seng Bank and HSBC Holdings jointly announced the proposal to delist Hang Seng Bank’s shares, with a privatization price of HK$155 per share for cash payment. HSBC Asia-Pacific is the offeror, and has requested the board of directors of Hang Seng Bank to submit the proposal to the planned shareholders for the privatization of Hang Seng Bank. After privatization, Hang Seng Bank will become a wholly-owned subsidiary of HSBC Holdings, and its 53-year listing status on the Hong Kong Stock Exchange will be revoked.
Currently, HSBC Asia-Pacific and HSBC Asia-Pacific Acting in Concert hold a total of 1.188 billion shares of Hang Seng Bank, accounting for approximately 63.35% of the total shares outstanding. The privatization involves approximately 684 million shares (HK$106 billion).
HSBC Holdings has offered a higher premium. According to disclosed information, based on data as of the end of June this year, for this privatization, HSBC Holdings offered a price-to-book ratio of 1.8 times for Hang Seng Bank (actual and unaudited figures), higher than the median of comparable companies in Hong Kong (0.4 times). Compared to Hang Seng Bank’s closing price on the most recent trading day (closing price of HK$119 on the 8th), the premium rate also reached 30.3%.
Regarding branding and customer service, HSBC reiterated that Hang Seng Bank has been rooted in Hong Kong for nearly a century, and will continue to serve the market with the dual brands of “HSBC” and “Hang Seng” after privatization. Hang Seng will retain its licensed bank status granted under the Banking Ordinance, and maintain independent corporate governance, brand image, unique market positioning, and branch network to ensure that customer service remains unaffected.
On the morning of the 9th, Hang Seng Bank surged 26.3%, closing at HK$150.3 at noon; HSBC Holdings fell 6.24%, closing at HK$103.7. Industry insiders believe that Hang Seng Bank still has some non-performing assets in the real estate sector that need to be digested. After privatization, HSBC Holdings will be responsible for these assets, which is one of the reasons for the difference in stock performance between the two.
In recent years, Hang Seng Bank has been burdened by commercial real estate loans in Hong Kong. According to the Hong Kong Economic Journal, analysts believe that bad debts from commercial real estate loans at Hang Seng Bank have increased, and HSBC plans to address these bad debts through privatization.
Hang Seng Bank’s interim performance shows that in the first half of the year, excluding expected credit losses, Hang Seng Bank’s total operating income was HK$20.975 billion, a 3% year-on-year increase, with pre-tax net profit of HK$8.1 billion, a 28.39% year-on-year decrease; attributable net profit to shareholders was HK$6.88 billion, a 30.46% decrease, with basic earnings per share of HK$3.34.
At the time, Executive Director and CEO Amy Shih mentioned that due to continued credit pressures in the real estate sector, the bank’s non-performing loan ratio was 6.69%. After increasing provisions, an expected credit loss of HK$4.9 billion was projected.
Public records show that Hang Seng Bank, headquartered in Hong Kong, was founded on March 3, 1933, by Lam Bing Yim, Ho Sin Hang, Leung Juck Whay, Sing Chun Lam, and Ho Tin Chang, and is one of the oldest banks in Hong Kong’s history. In 1965, during a bank crisis, HSBC acquired 51% of its shares for HK$51 million; it went public in 1972, becoming the first listed bank after the war, with its stock price soaring by 65% on the first day of trading.