HSBC CEO says Hang Seng privatization "purely strategic", unrelated to bad debt

HSBC’s (0005) move to take Hang Seng Bank (0011) private is "purely strategic" and intended to "further streamline and simplify" operations, said chief executive Georges Elhedery, denying any link to Hang Seng's recent bad loan challenges.

The statement came as HSBC unveiled a HK$106.1 billion offer to acquire the remaining shares of Hang Seng Bank it doesn't already own at HK$155 per share, representing a 30 percent premium to Wednesday's closing price and valuing the bank at 1.8 times price-to-book value.

Speaking at a media briefing on Thursday, the CEO said the decision represents a significant investment in Hong Kong's economy and “reflects our confidence in this market.”

He characterized the challenges in Hong Kong's commercial property market as cyclical issues expected to improve over the medium to long term.

Elhedery, who earlier told Bloomberg that HSBC plans to continue investing in Hong Kong talent when asked about potential job cuts, said the acquisition would create greater shareholder value than share buybacks.

HSBC will maintain Hang Seng Bank's brand, heritage, unique market position and branch network while increasing investment to drive innovation in products, services and technology, according to the CEO.

David Liao Yi-chien, HSBC's co-CEO for Asia and Middle East, at the briefing confirmed that the bank's dividend policy remains unchanged following the transaction.

HSBC's shares dropped 6.5 percent while Hang Seng jumped 26 percent as of 3pm in Hong Kong.