HSBC seeks 100% control of Hang Seng bank in $37bn buyout

HSBC is planning to acquire Hang Seng Bank in a deal worth more than $37 billion. The deal will follow a scheme of arrangements to take Hang Seng Bank private after its majority-held subsidiary faced pressure on its performance and exposure to faltering property markets in the city and mainland China. 

The offer will be priced at HK$155 per share for each Scheme share, valuing the deal at about HK$106.1 billion ($13.63 billion) for the purchase of the 36.5% of shares not already owned by HSBC and giving Hang Seng Bank a total valuation of $37 billion. The offer represents a 33% premium to Hang Seng’s undisturbed 30-day average closing price of HK$116.5 per share, translating to a 1.8x price-to-book multiple based on first-half 2025 results.

HSBC will retain Hang Seng’s operating structure

According to the announcement, Hang Seng shareholders will have the opportunity for immediate cash at a price exceeding the lender’s highest share value in over three years. Minority investors will also benefit directly from HSBC’s capital investment without having to wait for future dividend distributions. 

HSBC’s plan to acquire the lender aims to strengthen its local franchise while supporting broader confidence in Hong Kong’s financial system. Hang Seng Bank reiterated that Hong Kong remains a central hub for key Asian markets and growth across the Asia-Pacific region. 

Under the deal, Hang Seng’s independent identity, including its culture and operating structure, will be retained. HSBC has committed to preserving the bank’s brand, assuring customers that the existing products and services will remain accessible while offering expanded access to HSBC’s global network and product suite. The lender will continue to function as a licensed bank with its own governance, customer proposition, and branch network. 

Elhedery said that the bank would pause HSBC’s share buybacks for about three quarters to build up the capital required for the acquisition.

Michael Makdad, senior equity analyst at Morningstar, said the move was positive and long overdue, as parent-subsidiary double listings were inherently problematic in terms of governance. He added that HSBC will need to pay a premium, but there should be some opportunities for cost synergies.

Hang Seng’s stock jumps over 26% today 

Hang Seng’s fast-half financial results revealed that non-performing loans had reached 6.69% of total loans and advances to customers. The bank cited ongoing pressure in the property sector, which had risen from 6.12% as of December 31, 2024.  The bank stock has jumped today by over 26% with a day range of $136.80 – $168.00. HSBC Holdings PLC, listed on the NYSE, has also recorded a 1.12% jump today, trading at $ 71.50, following the announcement of acquisition plans in Hong Kong today. 

The acquisition will be funded through HSBC’s resources, excluding external financing. The bank revealed that it expects at least a 125-basis-point negative hit on day one following shareholder approval. The lender also aims to restore its Common Equity Tier 1 (CET1) capital ratio to its target range of 14.0%–14.5% through organic capital generation, while pausing new share buybacks for three quarters following the announcement. Hang Seng said it intends to maintain a 50% dividend payout ratio for 2025, excluding material one-off items.

Elhedery revealed in an interview with Reuters that the acquisition does not represent a bailout, saying both banks had communicated about Hang Seng Bank’s commercial real estate exposure.

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