London, Aug. 22 (Reuters): Global banking group HSBC Holdings Plc 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.
“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 per cent to Bital’s Tuesday closing price—and a total of $ 1.14 billion, assuming tender of 100 per cent of the shares.
HSBC said Bital’s board was recommending the offer, while controlling shareholders with 52 per cent of its shares had agreed to tender them.
HSBC said it would fully capitalise Bital in the next two years. Bital’s majority shareholders, the Berrondo family, estimate capitalisation costs at $ 450 million.
Shares in HSBC edged down 0.7 per cent to 763 pence in early London afternoon trade in a market up 1.5 per cent overall.
Bital shares closed 9.92 per cent higher at 10.75 pesos on Mexico’s stock market.
Mexico’s economy grew by an annual 2.1 per cent in the second quarter ending June, signalling that the country is starting to recover from recession.
Exeter Investment fund manager Geoff Miller said the Bital acquisition was a good move by HSBC given Mexico’s prospects.
Plugging a gap
“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 recognised that in a globalised 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.
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 such as Brazil and Argentina.