HSBC’s talks for $8bn Nedbank deal fall through

By Agency reporter

Monday, 18 Oct 2010


HSBC has ended talks to buy an $8bn majority stake in South Africa‘s Nedbank, leaving it without a clear Africa strategy and handing an opportunity to rival Standard Chartered.

According to Reuters, on Saturday, HSBC had been in exclusive talks with Anglo-South African insurer Old Mutual to buy up to 70 per cent of Nedbank, South Africa‘s fourth-largest bank, under an eight-week period of exclusivity due to end on Monday.

Both HSBC and Old Mutual said in statements on Friday that the talks had ended, without saying why negotiations broke down. Old Mutual said that, as far it was aware, it was not due to adverse findings during due diligence.

Nedbank‘s troubled retail unit could contain credit risks that might be a concern for HSBC, analysts said.

Nedbank shares had tumbled nearly 8 per cent in Johannesburg by 1309 GMT, while Old Mutual was down by six per cent in London. Shares in HSBC dipped by one per cent, and StanChart‘s added 0.5 per cent.

The deal may also have been complicated by HSBC‘s recent change in its chairman and chief executive following a boardroom power struggle. Tougher rules on bank capital and potential resistance from South African officials might have also hurt the negotiations, analysts said.

”The talks were undertaken on the premise that it would have given it optionality for growth in Africa,” analyst at Matrix in London, Andrew Lim, said.

“However, that was under the intentions of (outgoing Chief Executive Officer) Michael Geoghegan, and with the new management in place, they might have thought that following through on the acquisition was too risky, given the potential loan losses and lack of certainty on the loan book.”

The acquisition would have given HSBC, which has a limited presence in Africa, a gateway into the fast-growing continent, where other big banks are targeting its increasing trade with Asia.

Source: Punch







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