HSBC agrees 11 billion euros deal for CCF

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A global banking group is poised to become one of Europe’s most powerful after agreed takeover of CCF. HSBC Holdings plc (HSBC) has agreed to acquire all outstanding shares of Crédit Commercial de France (CCF) at a price of 150 euros per CCF share in cash or, as an alternative, 13 shares of HSBC for each CCF share, valued at approximately 160 euros per CCF share, based on the closing price of HSBC on Friday 31 March. The offer was recommended unanimously by the Board of CCF.

HSBC has agreed to acquire, subject to CECEI (Banque de France) approval, the shareholdings of KBC Bancassurances / Kredietbank Luxembourg, The Taiyo Mutual Life Insurance Company, Lafarge and SMABTP amounting in aggregate to 24.3 per cent of CCF’s share capital, and Swiss Life has committed to accept HSBC’s offer in exchange for shares of HSBC in respect of its holding of 15 per cent. ING has also committed to accept HSBC’s offer in respect of its holding of about 19 per cent of CCF’s share capital. Based on the current issued share capital of CCF, the aggregate value of HSBC’s cash offer is approximately 11 billion euros (USD10.5 billion).

CCF is a major French banking group, with businesses in personal, corporate and investment banking, asset management and private banking. It has 650 branches in France serving over one million customers in the middle and upper income bracket, and an important corporate and institutional business. It has funds under management of 57 billion euros. It is a leading foreign bank in Brazil and Egypt.

HSBC has entered into agreements with KBC Bancassurances/Kredietbank Luxembourg, The Taiyo Mutual Life Insurance Company, Lafarge and SMABTP for the acquisition for cash of their respective holdings of 13,914,627 shares, 2,667,534 shares, 887,992 shares and 455,093 shares of CCF, representing in aggregate 24.3 per cent of the outstanding share capital of CCF. These agreements are conditional upon the approval of the CECEI (Banque de France).

Further, Swiss Life has committed, in respect of its holding of 11,070,546 shares of CCF (15 per cent of the outstanding share capital), to accept HSBC’s offer and to elect to receive shares of HSBC in exchange under the share alternative being offered as part of the offer.

ING has also committed to accept HSBC’s offer in respect of its holding of about 19 per cent of the outstanding share capital of CCF.

Shareholders of CCF will be entitled to retain the dividend of 2.20 euros plus tax credit already announced and expected to be approved at the Annual General Meeting of CCF on 12 April 2000.

It is envisaged that, subject to the necessary approvals, the acquisition of CCF will be completed during the second half of 2000.

The Offer is strongly supported by the management of CCF. The Offer is recommended unanimously by the Board of CCF which met on 1 April 2000 and which considers the offer to be fair to CCF’s shareholders and positive for CCF’s staff, clients and commercial partners.

For HSBC this represents a unique opportunity to acquire a well-managed, fast growing French bank on an agreed basis and to establish a significant base in the Euro-zone. CCF would become one of the five largest businesses within the HSBC Group, together with the UK, the Hong Kong SAR and mainland China, Brazil and the United States.

The acquisition of CCF will serve HSBC’s strategic objectives by:

*Significantly increasing its personal wealth management business. The acquisition will add over 1 million retail customers in the middle and upper income bracket located in some of France’s fastest growing regions. CCF management expects to be able to increase its market share in this attractive higher income retail sector. HSBC’s expertise in direct to home banking and its well developed internet strategy will provide a major boost to CCF’s activities in this area.

*Enhancing its corporate and investment banking capabilities. CCF will add significantly to HSBC’s European business capability and will bring relationships with most major French companies. CCF will provide the major platform for HSBC in the Euro-zone, working with HSBC Trinkaus & Burkhardt in Germany. CCF’s clients will acquire access to global financial services of the HSBC Group. The acquisition of CCF will enhance HSBC’s ability to focus on the entirety of global needs of its largest customers.

In asset management, CCF which has 57 billion euros of funds under management, will enhance HSBC’s capabilities in European investment management products. In Brazil, both groups have important businesses providing opportunities to focus on wealth management and long-term savings services. The private banking businesses of HSBC and CCF will continue to operate as separate units.

HSBC and CCF expect synergy benefits in the order of 150 million euros after tax by the year 2001, the first full year of ownership. The gains would be achieved both through revenue enhancements and cost savings, with the emphasis on revenue. There will be minor costs of integration and restructuring.

For CCF, the proposed transaction will allow it to secure the support of a strong and stable shareholder, which will both ensure its long-term stability and reinforce its development potential.

Given the exceptional geographic complementarity between the two groups, it is envisaged that CCF will be the main platform for development in the Euro-zone for HSBC, thereby providing all of its businesses and employees with very strong growth potential.

The growth potential is further reinforced by the consistency and convergence of the strategies pursued by the two groups: a retail banking activity focused on personal banking, a corporate and investment banking activity oriented towards high value-added products and services, and a strong expansion in the asset management and private banking activities.

All of CCF’s businesses will thus be strengthened and will enjoy new growth opportunities, thanks to a broadening of its product range and its distribution channels, and the capacity to provide its clients access to a vast worldwide network.

CCF will also be able to leverage the expertise and infrastructure of HSBC in the area of information technology to accelerate the development of its on-line and direct banking services.

Within HSBC, CCF’s headquarters will remain in Paris and its board and management will continue to direct its affairs. The teams that have helped develop the group in recent years will remain in place and will be closely involved in its on-going management.

HSBC expects to issue 1.5-3.0 billion euros of ordinary shares pursuant to the Share Alternative Offer. In addition, HSBC plans to raise a further 2.5-3.5 billion euros through the issue of innovative Tier 1 securities. The balance of the required financing will be sourced from loan capital (1-2 billion euros) and HSBC’s own resources (3-5 billion euros). After taking account of the acquisition and the planned financing, HSBC’s target 31 December 2000 total capital ratio will be 12.5 per cent and target Tier 1 ratio 8.0 per cent.

Subject to the success of the Offer, it is intended that Charles de Croisset, the chairman and chief executive officer of CCF, will be invited to join the board of HSBC. He will remain chairman and chief executive officer of CCF. It is intended that two representatives of HSBC will join the board of CCF.

HSBC Group Chairman, Sir John Bond, said: “HSBC’s strategy is to complement organic growth with selective acquisitions. CCF is a highly respected banking group. If the outcome of our offer for CCF is successful we shall have a unique opportunity to build a platform in the Euro-zone, where we have been under-represented. It will also significantly increase our wealth management business, one of the key objectives of our strategic plan, and expand our ability to meet the needs of our global corporate and institutional clients. CCF and HSBC share complementary strategies and management values. I am confident that the acquisition of CCF is in the best interests of our shareholders.”

CCF chairman, Charles de Croisset, said: “In an increasingly global economy, CCF has today chosen to join forces with one of the top two banking groups in the world. CCF will become the main platform for HSBC in the Euro-zone. This transaction will significantly strengthen CCF and allow it to further improve the services it offers to its clients. The two groups share a similar culture, as they have been engaged, for more than a century, in the business of banking where personalised client relationship is paramount. Joining the HSBC Group will allow CCF to accelerate its development. It’s therefore great news for the company, for its employees and for the Paris market.

“The transaction is the result of extensive and friendly discussions, which have allowed us to reach agreement on a clear and concerted plan.

“For the shareholders, this is an attractive offer, which gives them the opportunity to become a shareholder in the best bank in the world, especially given the strong performance of its stock, which has had an average annual growth rate of over 20 per cent over the last 25 years.”

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