HSBC Holdings may bid for South Africa’s Nedbank, Sky News reported, a potential $4.4 billion deal that would give Europe’s largest bank a bigger profile in fast-growing Africa.
Buying a majority stake of South Africa’s fourth-largest lender would bulk up HSBC’s presence in Africa’s top economy and give it a wider platform for expansion on the growing continent.
Old Mutual, the Anglo-South African insurer that has a majority stake in Nedbank, has been under pressure from some investors to review its sprawling structure.
While Old Mutual is not in talks with potential buyers now, HSBC has appointed investment bank Lazard to advise on the possible takeover, Sky said.
But a potential deal could face resistance from South African regulators, who may be wary of another bank falling under foreign control and would want to keep proceeds from a deal at home.
Officials for HSBC, Nedbank, Lazard and Old Mutual all declined to comment.
“I think that selling Nedbank will be part of resolving (Old Mutual’s) capital issues,” said Tony Silverman, an analyst at S&P Equity Research in London.
“It would be better if the buyer is not South African from Old Mutual’s point of view, because the proceeds are more likely to be able to remain outside South Africa.”
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“Old Mutual’s strategy update in March I think made it very clear that banking was not part of their long-term strategy, so it was a case of when, rather than if, they find a suitor,” said one Johannesburg-based analyst, who declined to be identified, citing company policy.
Two of South Africa’s biggest banks already have significant foreign ownership and analysts have said the government may not be keen to allow a third.
Absa is majority-owned by Britain’s Barclays , while Standard Bank is 20 percent owned by the Industrial and Commercial bank of China (ICBC)
South Africa’s foreign-exchange controls may also prevent Old Mutual from taking proceeds abroad.
For Nedbank, a tie-up with HSBC would allow it to bolster an investment banking business that is weaker than that of its rivals.
“If you want to grow in Africa, given that most of the deals are infrastructure, investment banking, commodity-type deals … you want somebody with an investment banking platform,” the analyst said.
Nedbank’s alliance with pan-African lender Ecobank, would help HSBC bolster its presence in Africa’s quickly growing frontier markets.
Old Mutual owned about 52.2 percent of Nedbank as of the end of December, down from 54 percent a year earlier.
Buying that stake would cost R33.1 billion ($4.4 billion) based on Wednesday’s closing price of R127.12.
Nedbank has an enterprise value — a measure of a company’s value that also takes into account outstanding debt — of 148.6 billion rand, according to Thomson Reuters data.
Shares of Nedbank jumped at the start of trade on Thursday and were up 4.17 percent at R132.42 by 1211 GMT, making it the top percentage gainer on the JSE Top-40 index.
Old Mutual’s share rose 1.56 percent to 112.1 pence in London, and HSBC was up 2 percent at 627 pence.
“(Nedbank’s) share price is already reaping positive benefits out of corporate action. It’s much greater than where our price target would be for Nedbank. So we think it’s overvalued currently,” said another analyst, who also declined to be identified.
“I think the pricing may still be weaker than what people anticipate.”
A source with knowledge of the matter told Reuters in May that Britain’s Standard Chartered was interested in buying Old Mutual’s stake in Nedbank.
Africa is increasingly seen as an investment destination, thanks to abundant resources, massive population and rising personal incomes. ($1=7.610 Rand)
