HSBC announced that it, together with its wholly owned subsidiary, The Hongkong and Shanghai Banking Corporation Limited (HSBC Asia Pacific), has made a conditional proposal to take Hang Seng Bank private through a scheme of arrangement.

If approved, HSBC Asia Pacific would acquire all remaining shares held by minority shareholders and Hang Seng shares would be withdrawn from the Hong Kong Stock Exchange.

The Proposal offers HK$155 for each Hang Seng share, representing a 33% premium over the 30-day average closing price of HK$116.5 per share.

This reflects a significant increase compared with Hang Seng’s historical trading prices and analyst consensus targets, and is higher than its highest share price in the past 3.5 years.

The total valuation implied by the offer is HK$290 billion, corresponding to a 1.8x 1H25A price-to-book multiple, which is higher than that of comparable Hong Kong peers. HSBC has confirmed that this offer is final.

The Proposal would give minority shareholders the opportunity to receive immediate cash for their shares, without having to rely on future dividends.

HSBC said the Proposal is consistent with its strategic priority of growing its business in Hong Kong and simplifying its operations.

Hong Kong is considered a core market for HSBC, and the Proposal reflects the bank’s confidence in the growth potential of both HSBC Asia Pacific and Hang Seng.

HSBC has also stated that it will maintain Hang Seng’s separate banking licence, brand, governance, customer proposition, and branch network.

Existing Hang Seng customers would continue to access its products while also benefiting from HSBC’s global network.

HSBC expects this alignment to create opportunities for growth by combining Hang Seng’s strengths with HSBC’s wider resources.

The Proposal will be funded entirely from HSBC’s own financial resources.

The expected immediate capital impact is around 125 basis points.

HSBC plans to restore its CET1 ratio to the target range of 14.0–14.5% through organic capital generation and by not undertaking further buybacks for three quarters following this announcement.

A previously announced share buyback will continue as planned, and HSBC maintains a target dividend payout ratio of 50% of earnings per ordinary share for 2025, excluding material notable items.

The bank expects the investment in Hang Seng to be accretive to earnings per ordinary share.

Georges Elhedery, Group CEO of HSBC, commented:

“Our offer is an exciting opportunity to grow both Hang Seng and HSBC. We will preserve Hang Seng’s brand, heritage, distinct customer proposition and branch network, while investing to unlock new strengths in products, services, and technology to deliver more choice and innovation for customers.

“This proposal fully meets our criteria for value-accretive investments: it aligns with our strategy, enhances growth and scale, does not distract us from organic growth, and delivers greater shareholder value than buybacks.”

Featured image credit: Edited by Fintech News Hong Kong, based on image by lifeforstock via Freepik