29 August, 2009

South Africa Bank Mergers & Acquisitions (Standard Bank Group)




Photo: A man is seen walking by a Standard Bank building in Johannesburg, South Africa.

Photo credit: This photo was taken by Keso, an IT professional based in Beijing, China. You can view his photo stream via this link: http://www.flickr.com/photos/keso/

Standard Bank Group Ltd.

(Standard Bank of South Africa)

In 1862, Briton John Paterson founded the Standard Bank of British South Africa.  Backed by British capital, the bank's original head office was in London, but with a colonial headquarters in Port Elizabeth in Cape Colony.  In 1866, the very first diamond in South Africa was discovered along the banks of Orange River, around the borders of the Cape Colony, the Transvaal and the Orange Free State.  Three years later, another diamond was discovered and the diamond rush soon began. Standard Bank in 1870 opened a branch in Klipdrift in the heart of the diamond fields. The bank would make advances against the estimated values of the diamonds, then forward the diamonds to London for sale on behalf of the diggers.  Standard Bank became prominent in financing the diamond mines of Kimberley in the 1870s.

At the same time, gold was also discovered in the Transvaal (officially Zuid-Afrikaansche Republiek), which at the time was an independent country.  Because Standard Bank of British South Africa's memorandum of association limited its sphere of operations to only areas under British jurisdiction, the bank initially was not able to enter the Transvaal market. However, in 1877, Britain annexed the Transvaal and Standard Bank promptly opened branches around the gold mines.  The annexation, however, eventually led to the bloody First Boer War between the Boers (Dutch settlers of the Transvaal, who were against British rule) and Britain itself in 1880. The British forces were soundly defeated in 1881 and the Transvaal regained its independence.  Standard Bank of British South Africa once again faced the same dilemma in the Transvaal: either withdraw from the Transvaal or alter its memorandum of association to allow itself to operate in jurisdictions not under British control.  The bank opted for the latter in order to stay in the Transvaal in 1881.  Two years later in 1883, the bank dropped 'British' from its name and became known as the Standard Bank of South Africa.

Standard Bank's decision to remain in the Transvaal proved very fortunate, for in 1886 major gold deposits were discovered.  Standard Bank promptly opened a branch under a tent in the mining camp, which would evolve into today's Johannesburg.  Standard Bank is said to have handled half the output of the second largest gold field in the world on its way to London.

More discoveries of diamond and precious metals mines in the region reignited British imperial greed and the Second Boer War was fought between Britain, the Transvaal and the Orange Free State between 1899 and 1902. This time, the Boers lost and Britain annexed both republics, which in 1910 were amalgamated into the Union of South Africa along with Cape Colony and Natal Colony.

Throughout the 1890s and 1900s, Standard Bank opened its first offices outside of South Africa: Southern Rhodesia (now  Zimbabwe, 1892); Northern Rhodesia (now, Zambia, 1893);  Portuguese East Africa (now Mozambique, 1894); Bechuanaland (now Botswana, 1897); Basutoland (now Lesotho, 1901); Basutoland (now Lesotho, 1901), Nyasaland (now Malawi, 1901), British East Africa (now Kenya, 1911); Belgian Congo (now Democratic Republic of Congo, 1911) Zanzibar (1911); Uganda (1912); South West Africa (now Namibia, 1915) and Tanganyika (now Tanzania, 1916).

Then in 1920, Standard Bank of South Africa acquired full control of the African Banking Corporation, which was a fellow British colonial bank with operations in Southern and West Africa.

South Africa left the British Commonwealth and became a republic in 1961.  The next year, a restructuring led to the establishment of a British-based holding company called Standard Bank Ltd., over which subsidiary Standard Bank of South Africa carried on business in South Africa and South West Africa (today’s Namibia). In 1965, Standard Bank bought the Bank of West Africa, expanding in Nigeria, Ghana, Sierra Leone and Gambia.

As size became increasingly important to manage the risk of ever-expanding loan portfolios, Standard Bank Ltd. decided to merge with the Chartered Bank in 1969 to create the Standard and Chartered Banking Group, combining their African and Asian networks into a major international bank. As part of the merger, a new holding company for the South African operations called Standard Bank Investment Corporation (‘Stanbic,’ now Standard Bank Group Ltd.) was created. Then in 1970, Standard and Chartered floated part of Standard Bank Investment Corp. on the Johannesburg Stock Exchange. In 1975, Standard and Chartered Banking Group shortened its name to Standard Chartered Bank.

Throughout the 1980s, South Africa’s white minority establishment and its discriminatory policies against the black majority population came under increasing criticism and scrutiny. Great Britain, South Africa’s largest foreign investor and trading partner, faced mounting pressure to join the anti-Apartheid boycott and to sever economic and political ties with the white-controlled South African government. After years of controversies, Standard Chartered Bank in 1987 finally divested its remaining 39% stake in Standard Bank Investment Corp. for USD $254-million to local South African institutions and the public. Standard Chartered Bank had the dubious reputation as the last foreign bank to leave South Africa. The sale was the largest divestment ever in South Africa by a foreign company at the time.

Having lost its connection to former parent Standard Chartered’s African operations outside of South Africa, Standard Bank began to rebuild its own African network, opening a branch in Swaziland in 1988. During the 1990s, Standard Bank either acquired or opened new subsidiaries in Botswana, Lesotho, Tanzania, Swaziland and Uganda. In 1993, the bank acquired the ANZ Grindlays Bank’s operations in Botswana, Kenya, Uganda, Zaire, Zambia and Zimbabwe, and minority holdings in banks in Ghana and Nigeria from the Australia & New Zealand Banking Group (ANZ).

To avoid confusion with its former parent and now competitor, Standard Bank adopted the name 'Stanbic Bank' in those African countries (outside of South Africa) where Standard Chartered Bank also operated. 

Recent transaction(s): 

  • In 1992, Standard Bank set up a British subsidiary called Standard Bank London.
  • In 2001, Standard Bank bought Jardine Fleming Bank Ltd. in Hong Kong. Standard Bank planned to use this Hong Kong platform to expand its Asian and China operations.
  • In 2002, Standard Bank Investment Corp. was renamed Standard Bank Group.
  • In 2002, Standard Bank bought Ugandan Commercial Bank.
  • In 2003, the bank established investment banking operations in Russia and Brazil.
  • Also in 2003, Standard Bank acquired control of Banco Standard Totta de Moçambique.
  • In 2007, Industrial and Commercial Bank of China (ICBC) agreed to subscribe to new shares representing 20% of the newly-enlarged capital of Standard Bank Group Ltd. for ZAR 36.7-billion (USD $5.46-billion, HKD $42.32-billion, CNY 40.95-billion). Standard Bank was Africa's largest bank group and had operations in 18 African countries and 19 countries outside of Africa. It had 713 branches in South Africa and another 240 in the rest of Africa.
  • In 2007, Standard Bank took over a majority stake in BankBoston Argentina from Bank of America for USD $120-million. BankBoston Argentina, to be merged into Standard Bank’s own Argentine operations, had more than 80 offices in the country and about USD $1.64-billion of deposits. Standard Bank would own 76.7% of the enlarged Standard Bank Argentina, with the remaining stake being owned by local investors.
  • Also in 2007, Standard Bank merged its subsidiary Stanbic Bank (Nigeria) with IBTC Chartered Bank to acquire a 33% stake in the enlarged IBTC Chartered. As part of the agreement, Standard Bank then acquired an additional 17.1% of IBTC Chartered for ZAR 2.8-billion (USD$ 400-million) to hold a 50.1% stake of IBTC Chartered. This deal marked the first major investment by Standard into Nigeria, an oil-rich country. IBTC Chartered specialized in investment banking and had 56 offices in Nigeria.
  • In 2008, Standard Bank bought 60% of Kenya’s CfC Bank and renamed it CfC Stanbic Holdings.
  • In 2009, Standard Bank invested USD $200-million of convertible loan in Russian-based investment bank Troika Dialog Group Ltd. Troika Dialog was the largest independent investment bank in Russia. Standard Bank would also contribute its Russian operations ZAO Standard Bank to Troika Dialog. In return for the two-stage transaction, Standard Bank would own a 33% stake in Troika Dialog.
  • In March 2011, Standard Bank sold its 36.4% stake in Russian investment bank Troika Dialog to Russia's OAO Sberbank for USD $372-million. The sale was part of a deal by Sberbank to acquire all of Troika Dialog for USD $1-billion (RUB 28.55-billion). The only other shareholder of the investment bank was TDM Partnership.
  • In August 2011, Standard Bank sold 55% of its 75% stake in Standard Bank Argentina and its two local affiliates to China's ICBC. ICBC acquired an additional 25% stake from other shareholders, bringing its ownership in Standard Bank Argentina to 80%. The total cost to ICBC was USD $600-million (ARS 2.49-billion, ZAR 4.31-billion, CNY 3.86-billion, HKD $4.68-billion). Standard Bank Argentina had 103 branches. ICBC and Standard Bank also agreed to inject a total of USD $100-million of new capital into the Argentine bank based on their new ownership levels.
  • In January 2014, Standard Bank sold 60% of its London-based global markets business to China's ICBC for USD $765-million (ZAR 8.64-billion, CNY 4.63-billion, HKD $5.94-billion). The deal also gave ICBC a call option to buy another 20% of the unit for five years, starting two years after the closing of the transaction.  If the call option is taken up by ICBC, then Standard Bank can exercise a put option to force the Chinese bank to purchase the final 20% of the unit.  The global markets unit provides trading and other services in foreign exchange, commodities, interest rates, debt and equity products.



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