(Reuters) – HSBC said on Thursday it had asked the board of directors of Hang Seng Bank to submit a privatization proposal to shareholders through a plan of arrangement, in accordance with Hong Kong’s Companies Ordinance.
Hang Seng Bank, a subsidiary of HSBC in which the Asia-focused British bank has a majority stake, has faced criticism over its performance and exposure to property markets in Hong Kong and mainland China.
Under HSBC Asia Pacific’s proposal, Hang Seng Bank shares would be canceled in exchange for a cash payment of 155 Hong Kong dollars per share, a transaction of approximately 106.1 billion (11.71 billion euros) for 36.5% of the capital not held by HSBC.
The offer represents a 30.3 percent premium to Hang Seng Bank’s closing share price of HK$119 on Wednesday, according to HSBC.
It is subject to adjustment for any dividend declared after the announcement date, excluding the third interim dividend of 2025, specifies a press release from HSBC to the Hong Kong Stock Exchange.
“Privatization represents a significant investment for Hong Kong,” HSBC said in the statement.
“It demonstrates HSBC’s strong belief in Hong Kong’s future as a leading global financial center and super-connector between international markets and mainland China,” the statement added.
Hang Seng Bank has reported an increase in bad loans in recent years, due to its relatively high exposure to the Hong Kong and mainland Chinese property markets.
The transaction would have a negative impact of around 125 basis points on HSBC’s CET1 solvency ratio, a key measure of its financial health which stood at 14.6% at the end of June, Europe’s largest bank in terms of market capitalization said on Thursday.
HSBC adds that it plans to return the CET1 ratio to its operational objective, between 14.0% and 14.5%, through organic capital generation and by not carrying out any additional buybacks over the next three quarters.
Privatization programs are commonly used in Hong Kong to streamline company structures and reduce costs associated with maintaining a public listing.
The offer price is final, according to HSBC, which adds that it does not reserve the right to revise it.
(Written by Scott Murdoch in Sydney, with Adwitiya Srivastava in Bangalore; Augustin Turpin)
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