CNN.com - HSBC buys Mexican bank Bital
LONDON (Reuters) -- Global banking group HSBC Holdings said on Wednesday it agreed to buy Mexico's No. 5 bank Grupo Financiero Bital for a maximum $1.14 billion in cash, boosting its presence in the fast-growing Mexican market.
Europe's biggest bank by market value had been considering the possibility of taking over Bital for some time and said the takeover fitted its strategy of raising its North American profile. HSBC already has operations spanning Europe, Asia and the Americas.
"The acquisition is in line with our strategy of increasing our presence in North America and will enable us to become one of the few banks that facilitate trade seamlessly amongst the NAFTA (North American Free Trade Agreement) countries," HSBC said in a statement.
Targeting high profitability
"Bital is a strong bank with growth opportunities that we aim to make one of Mexico's most profitable in the coming years," Alexander Flockhart, vice president for HSBC commercial banking in the United States, told reporters in Mexico City.
HSBC said its offer for Bital was worth about $1.20 per share on a fully diluted basis -- a premium of about 20 percent to Bital's Tuesday closing price -- and a total of $1.14 billion, assuming tender of 100 percent of the shares.
HSBC said Bital's board was recommending the offer, while controlling shareholders with 52 percent of its shares had agreed to tender them.
HSBC said it would fully capitalize Bital in the next two years. Bital's majority shareholders, the Berrondo family, estimate capitalization costs at $450 million.
Shares in HSBC edged down 0.7 percent to 763 pence in early London afternoon trade in a market up 1.5 percent overall.
Bital shares closed 9.92 percent higher at 10.75 pesos on Mexico's stock market. Mexico's economy grew by an annual 2.1 percent in the second quarter ending June, signaling that the country is starting to recover from recession.
Mexico benefiting from U.S. ties
Exeter Investment fund manager Geoff Miller said the Bital acquisition was a good move by HSBC given Mexico's growth prospects.
"Mexico is a country which should do well in the long run, thanks to its close ties with the United States," said Miller, who manages around 500 million pounds ($762 million) in assets, including HSBC shares.
Bital has about 1,400 branches and six million customers. Following a wave of foreign bank takeovers in the last two years, Mexico's No. 4 banking group Banorte is now the only major bank left in Mexican hands.
"Our shareholders recognized that in a globalized world where global banks dominate the market it was difficult to compete. We have decided to leave our bank in the hands of the experts," said Luis Berrondo, chairman of Bital's board of directors. His family owns more than 50 percent of Bital.
Plugging a gap
West LB banking analyst James Hamilton, who has a "neutral" rating on HSBC's shares, said buying Bital would plug a gap in HSBC's Latin American operations. HSBC already has a significant presence in countries like Brazil and Argentina.
Spain's Banco Santander Central Hispano holds about 27 percent. ING Group of the Netherlands controls 19.2 percent of Bital.
ING, which has a joint venture with Bital, said it was studying the HSBC move and its consequences, while Santander said it was "ready to allow HSBC to take control" of Bital.
Santander recently backed off an opportunity to raise its stake in Bital, citing the high asking price. That raised speculation that it would sell its shares to help bolster its depleted capital base.
Argentina effect
SCH, buffeted by the economic crisis in Argentina, has raised at least 800 million euros ($782 million) this year by selling shareholdings. It retains eight percent of Royal Bank of Scotland.
Analysts say it needs to raise a further two billion euros to boost capital ratios dented by Latin America currency weakness and a round of acquisitions.
HSBC said it expected to launch a tender offer for the outstanding Bital shares and complete the takeover during the fourth quarter of 2002.
HSBC shares have outperformed the European banking sector by about four percent since the start of 2002.
HSBC said at the start of this month that chargeoffs in Argentina and Hong Kong cut into its profits, which fell 7 pecent for the first half of the year (full story).
