HSBC joins the M&A mix
HSBC has the green light to make an offer for South Africa's fourth-largest bank.
Old Mutual owns 51% of Nedbank and the insurer is a motivated seller because the company is selling assets to pay down debt. HSBC won't be able to gain 100% of Nedbank's outstanding shares because South African law reserves a percentage of shares for black investors, but the company should be able to gain the 70% of shares that it has said will let it achieve its strategic goals.
And what are those goals?
First, but not foremost, HSBC wants to gain a foothold in Africa's largest economy.
Second, and more importantly, HSBC wants to stake a claim to finance the increasingly important trade between Africa and Asia. Roughly a third of Africa's exports, mostly minerals and other commodities, head for Asia these days.
Ten years ago, only 1% of Africa's exports went to China. Today, China is the destination for 10% of the continent's exports, and with China investing in Africa's commodities as fast as it can identify deals and funding big infrastructure projects like the proposed Durban-to-Johannesburg high-speed rail line, that Africa-China traffic will continue to grow.
And now that HSBC has defined itself as an Asian bank, it can't afford not to have a presence in Africa.
The price looks reasonable at an estimated $8 billion. And I think HSBC will manage the sensitive politics of South Africa well enough to ink the deal.
As of August 30, I'm keeping my target price for this Jubak Picks Portfolio holding at $67 per share by June 2011.
At the time of this writing, Jim Jubak didn't own shares of any company mentioned in this post in his personal account.
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The expected $3.36 billion offering from Citizens Financial Group won't come close to Alibaba's, but it will be an important one for the market.
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