Is HSBC’s US$13.6 billion buyout offer good enough for Hang Seng Bank investors?
While the premium for Hang Seng Bank shares is huge, analysts debate if it is a win-win for investors and HSBC’s long-term value
HSBC Holdings’ US$13.6 billion bid to take full control of Hang Seng Bank could be enticing enough for investors to cash out as the deal creates long-term value for the London-based bank, although some analysts said the offer could be sweeter.
On Thursday, HSBC offered to acquire the remaining 36.5 per cent stake in Hang Seng Bank it does not own at HK$155 per share, a 30 per cent premium over the previous closing price. The bank owns 63.5 per cent of Hong Kong’s largest domestic bank.
The proposal valued Hang Seng Bank at HK$290 billion (US$37.3 billion), representing 1.8 times its book value – “significantly higher” than comparable Hong Kong peers, according to HSBC. The book value offers insights into whether a stock is over or undervalued.
The generous offer propelled Hang Seng Bank’s stock to log its biggest intraday surge on record.
However, Mike Leung Kit-man, director of Wocom Securities, said a “reasonable” price-to-book ratio should be between 2.3 and 2.5 times.