If a new business deal goes through successfully, one of the UK’s best business bank accounts stands to gain a strong beach-head in the banking market for South Africa.
HSBC recently entered unilateral negotiations to acquire a majority share of Nedbank, the fourth-largest financial institution in South Africa, in a possible acquisition that could be worth in excess of £4.5 billion.
The former stakeholder, Old Mutual, listed its 55 per cent interest sale earlier this past year, and HSBC has demonstrated a desire to buy those shares in addition to offering to buy out other Nedbank shareholders to increase their interest to 70 per cent overall.
HSBC faced early competition for the shares from Old Mutual by rival banking institution Standard Chartered, both of which are based in Britain but derive a large percentage of their operating budgets from overseas markets. Both corporations have viewed the South African market as an important jumping-off point for increasing their international market share.
HSBC’s manoeuvre is nearly guaranteed to provoke the South African government to scrutinise the deal very closely due to its desire to limit the percentage of its domestic banks that become controlled by foreign corporations. Industry experts have warned that the entire purchase process will most likely encounter protracted delays, similar to when Barclays spent £2.9 billion in a buyout of Absa, South Africa’s largest retail banking institution, in 2005.
There are additional complications due to uncertainty for how Old Mutual will actually receive payment for the sale, as South African law restricts the movement of foreign funds out of the country.
HSBC released a statement recently in which it stated that it has entered into unilateral negotiations with Old Mutual in regards to the possibility of acquiring their Nedbank shares, stating that the the negotiations are conditioned on obtaining the approval of the South African government through compliance with their regulatory processes, among other factors.
In a related statement by Old Mutual, the insurance provider stated that there is no guarantee that the current negotiations betwtixt it and HSBC will result to any transactions of any kind.