Hamilton, Bermuda 14 June 2023 – In a filing with the Bermuda Stock Exchange (“BSX”), HSBC Holdings plc (Ticker: HSBC.BH) announce the update on Sale of Retail Banking Business in France shares. The full filing stated:
14 June 2023
HSBC HOLDINGS PLC
ANNOUNCEMENT PURSUANT TO RULE 14.36 OF THE HONG KONG LISTING RULES
UPDATE ON SALE OF RETAIL BANKING BUSINESS IN FRANCE
HSBC Continental Europe (‘HBCE’) has today signed a further Memorandum of Understanding regarding certain potential changes to the terms of the sale of its French retail banking business.
The following potential changes are designed to enable the Purchaser to satisfy its future capital requirements (following significant interest rate rises since the sale was first agreed in 2021) and to obtain regulatory approval for the transaction:
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On 18 June 2021, HSBC Holdings plc (‘HSBC’) announced (the ‘2021 Announcement’) that HSBC Continental Europe (‘HBCE’) had signed a Memorandum of Understanding with Promontoria MMB SAS (‘My Money Group’) and its subsidiary Banque des Caraïbes SA (the ‘Purchaser’, and together with My Money Group, the ‘Purchaser Group’) regarding the potential sale of HBCE’s retail banking business in France (the ‘Business’) (the ‘Transaction’). The parties subsequently entered into a binding framework agreement (‘Framework Agreement’) on 25 November 2021. My Money Group and the Purchaser are under the control, directly or indirectly, of funds and accounts managed or advised by Cerberus Capital Management L.P.
On 14 April 2023, HSBC announced that following significant interest rate rises since the sale terms were agreed in 2021, completion of the Transaction was less certain and that the Business was no longer being classified as held for sale.
The parties have today signed a further Memorandum of Understanding (‘MoU’) regarding certain potential changes to the terms of the Transaction (the ‘Potential Changes’) which are designed to enable the Purchaser to satisfy its future capital requirements and to obtain regulatory approval for the Transaction. The Potential Changes do not alter the underlying rationale for the Transaction as set out in the 2021 Announcement.
The Potential Changes involve changes to the Transaction perimeter and amendments to certain other agreements as summarised below:
The signing of the MOU has been approved by the boards of directors of HBCE, My Money Group and the Purchaser.
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Financial terms and impact of the Transaction (taking into account the Potential Changes)
The terms of the Transaction announced in 2021 contemplate HBCE transferring the Business to the Purchaser with a net asset value of c.€1.65bn (c.$1.8bn) on Closing, subject to adjustment in certain circumstances, in exchange for consideration of €1 ($1.08). Taking into account the Potential Changes, the net asset value to be transferred in connection with the Transaction is expected to be substantially unchanged from the terms of the Transaction announced in 2021.
There is no immediate change to the accounting treatment of the French retail business under IFRS – there will be an information and consultation process with respective works councils and the transaction remains subject to regulatory approvals. Temporary deferred tax liabilities may arise as a result of differences in accounting treatment between IFRS and HBCE accounts prepared on a French GAAP basis.
Taking into account the Potential Changes, the financial impacts of the Transaction on the HSBC Group (on a consolidated basis) are currently expected to be[4]:
The table below sets out the expected estimated position, assuming a Swap Rate of 3.0% and an Origination Rate of 4.0%, in each case at Closing, and a nil initial value ascribed to the profit participation interest. To the extent that the expected Swap Rate and Origination Rate at Closing vary and a value is ascribed to the profit participation interest, the estimated transferring net asset value and therefore pre-tax loss may reduce.
Estimate as at 31 May 2023 |
Expected timing of P&L impact |
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$1.9bn |
2H23 |
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Purchase price expected to be payable on Closing |
€1 ($1.08) |
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Estimated resulting pre-tax loss |
($1.9bn) |
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Other estimated P&L transaction impacts (including transaction costs, write-offs and recycling reserves) |
($0.4bn) |
2021-2024 |
Goodwill impairment |
($0.4bn) |
2022 |
($2.7bn) |
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Of which: estimated to be recognised upon reclassification as held for sale |
($2.2bn) |
2H23 |
Given the financial terms of the Transaction, it is not expected that the Transaction will result in any net proceeds of sale for the HSBC Group.
The Board of Directors of HSBC Holdings plc believes the terms of the Transaction (as varied by the Potential Changes) remain fair and reasonable and in the interests of shareholders as a whole. The financial terms and aggregate contemplated consideration of the Transaction (as varied by the Potential Changes) were arrived at after arm's length negotiations and having taken into account the value of the component elements of the Business and the reasons for the Transaction as set out in the 2021 Announcement (as well as the Potential Changes set out above).
Indicative timetable, next steps and conditions
The MoU records the status of the negotiations between the parties in respect of the Potential Changes and sets out the information and consultation process of HBCE and the Purchaser with their respective works councils, which will commence shortly. If, following the outcome of these processes, the parties were to decide to implement the Potential Changes, they would enter into the requisite binding agreements.
The Transaction remains subject to regulatory approvals. The parties are aiming to close the Transaction on 1 January 2024. The long stop date for the Transaction is 31 May 2024, extendable to 29 November 2024 in certain circumstances.
Listing Rules implications
The entering into of the MoU between the parties constitutes a material variation of the terms of the Transaction (as set out in the 2021 Announcement) and is therefore required to be disclosed pursuant to Rule 14.36 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the 'Hong Kong Listing Rules').
The Transaction (factoring in the Potential Changes) remains a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules and, in view of a cap on the overall consideration for the Transaction that has been included in the Framework Agreement (being the governing transaction agreement), also remains a disclosable transaction under the Hong Kong Listing Rules.
Miscellaneous
The Board of Directors of HSBC Holdings plc as at the date of this announcement comprises: Mark Tucker*, Noel Quinn, Geraldine Buckingham†, Rachel Duan†, Georges Elhedery, Carolyn Julie Fairbairn†, James Anthony Forese†, Steven Guggenheimer†, José Antonio Meade Kuribreña†, Kalpana Morparia†, Eileen K Murray† and David Nish†.
* Non-executive Group Chairman
† Independent non-executive Director
For and on behalf of
HSBC Holdings plc
Aileen Taylor
Group Company Secretary and Chief Governance Officer
Investor enquiries to:
Richard O'Connor |
+44 (0) 20 7991 6590 |
investorrelations@hsbc.com |
Media enquiries to:
Press Office |
+44 (0) 20 7991 8096 |
pressoffice@hsbc.com |
Heidi Ashley |
+44 7920 254057 |
heidi.ashley@hsbc.com |
Sophie Ricord |
+33 689101762
|
sophie.ricord@hsbc.fr |
Note to editors:
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 62 countries and territories. With assets of US$2,990bn at 31 March 2023, HSBC is one of the world's largest banking and financial services organisations.
This announcement contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements may be identified by the use of terms such as 'expects,' 'targets,' 'believes,' 'seeks,' 'estimates,' 'may,' 'intends,' 'plan,' 'will,' 'should,' 'potential,' 'reasonably possible', 'anticipates,' 'project', or 'continue', variation of these words, the negative thereof or similar expressions or comparable terminology. HSBC has based the forward-looking statements on current plans, information, data, estimates, expectations and projections about, among other things, results of operations, financial condition, prospects, strategies and future events, and therefore undue reliance should not be placed on them. These forward-looking statements are subject to risks, uncertainties and assumptions about us, as described under 'Cautionary statement regarding forward-looking statements' contained in the HSBC Holdings plc Annual Report on Form 20-F for the year ended 31 December 2022, filed with the SEC on 22 February 2023 (the '2022 Form 20-F'). HSBC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein might not occur. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of their dates. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements. Additional information, including information on factors which may affect the HSBC Group's business, is contained in the 2022 Form 20-F.
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