HSBC walked away yesterday from its proposed 50bn rand (£4.6bn) takeover of 70 per cent of South Africa's Nedbank – but the company could come back to the table if its majority owner, Old Mutual, lowers its price.
Europe's biggest bank has been seeking an enhanced foothold in Africa's biggest economy to capitalise on the rapidly expanding trade flows between Africa and Asia. It is understood that the bank could also now turn its attention to other targets with that aim in mind. HSBC announced talks with Old Mutual, which is listed in London but largely South African, with some fanfare while still under the control of Michael Geoghegan. He has since stepped down as chief executive after an unprecedented bout of boardroom back-stabbing, when it became clear that he stood no chance of replacing the departing Stephen Green as HSBC chairman – a role won by the finance director, Douglas Flint.
Sources close to Old Mutual, which owns just over 50 per cent of Nedbank, said they suspected the change of management at HSBC was behind the move. But HSBC stressed yesterday that this was not the case.
HSBC, which replaced Mr Geoghegan with the investment banking chief Stuart Gulliver, said: "HSBC Holdings announces that discussions with Old Mutual plc about the possible acquisition of a majority stake in Nedbank Group have not been successfully concluded and have ended. Notwithstanding this, HSBC remains committed to the South African market and to growing its business in South Africa."
It is understood that HSBC's acquisition team felt it could not justify paying a 20 per cent premium for Nedbank compared with its market capitalisation on the Johannesburg stock exchange, having run the rule over Nedbank's branch network and lending. HSBC entered the fray after talks between Old Mutual and Standard Chartered collapsed. The emerging markets bank, listed in London like HSBC, also came to the conclusion that it could not justify the asking price.
Standard Chartered, which announced a £3.5bn rights issue on Wednesday, said yesterday that it would not return to the table. "We are committed to organic growth and will not be buying Nedbank in the short to medium term," a spokesman said.
The failure of two attempted deals for Nedbank was seen as a blow to Old Mutual, and the insurer's London listed shares fell 6.9p to 138.3p yesterday, reflecting investors' disappointment.
Nedbank was not involved in the talks between HSBC and Old Mutual but said when they were revealed in August that HSBC was "an attractive international banking partner" that would help the company to strengthen its position in South Africa.
HSBC has just five branches in the country and only a small presence across the rest of the continent. Nedbank would have provided the bank with a network of 443 branches across South Africa, together with a firm footprint in other sub-Saharan countries, including Malawi, Namibia and oil-rich Angola.