19 February, 2010

Great Britain Bank Mergers & Acquisitions (Standard Chartered)

Photo: Hong Kong has been Standard Chartered's most profitable market for well over 100 years. This is a (Standard) Chartered Bank's HKD $10 banknote from the early 1980s. The bank's Hong Kong headquarters featured in the banknote, sadly, has since been re-developed.

Standard Chartered plc

Standard Chartered Bank came into being in 1969 when the Chartered Bank of India, Australia and China merged with the Standard Bank of South Africa.

The Chartered Bank of India, Australia and China

James Wilson, a Scot and free-trade advocate who launched The Economist magazine back in 1843, was granted a Royal Charter by Queen Victoria in 1853 to establish The Chartered Bank of India, Australia and China. As the name suggests, the Chartered Bank has always focused in Asia. The bank opened its first branches in Calcutta (now Kolkata) and Shanghai in 1858. It expanded to Hong Kong and Singapore in 1859. In 1862, the Chartered Bank was authorized to issue Hong Kong's banknotes, a privilege it still enjoys today along with HSBC and the Bank of China (Hong Kong) Ltd.

The Chartered Bank appointed an agency in Jakarta in 1863, in Manila in 1872, and opened a branch in Penang, Malaysia in 1875. With trade flourishing following the 1869 opening of the Suez Canal and the telegraph cable connection between Europe and the Far East in 1871, the bank was well-positioned to provide trade financing between Asia and Europe. Cotton, indigo and tea from India, rice from Burma and China, sugar from Java, hemp from the Philippines and silk from Japan formed the bulk of trade that the Chartered Bank built its business upon.

Throughout the 1900s and 1910s, the Chartered Bank appointed agencies across Africa and the Middle East. In 1923, the bank became the first foreign bank to be granted a branch license in New York.

In 1957, the Chartered Bank acquired the Eastern Bank, expanding the bank’s branch network into the Middle East. The Eastern Bank had the distinction to be the very first bank in Bahrain (1920) and in Qatar (1950).

Standard Bank of South Africa

John Paterson founded the Standard Bank of British South Africa in 1862 in the Cape Province of South Africa. The bank was prominent in financing the diamond mines of Kimberley from 1867 onwards. It expanded to Johannesburg where gold was discovered there in 1885. The Standard Bank is said to have handled half the output of the second largest gold field in the world on its way to London.

The Standard Bank of South Africa opened a branch in Botswana in 1897. In 1911, the bank opened a branch in Kenya, followed by another one in Tanzania in 1916. By 1953, the bank had 600 offices across Southern, Central and Eastern Africa.

In 1962, the bank’s name was shortened to Standard Bank Ltd. In 1965, Standard Bank took over the Bank of West Africa (founded 1894 in London as the Bank of British West Africa), giving the bank a network of 60 branches in Nigeria, nearly 30 in Ghana and others in Sierra Leone and the Gambia.

Standard Chartered plc

As size became increasingly important to manage the risk of ever-expanding loans, the Chartered Bank and the Standard Bank decided to merge in 1969 to create the Standard and Chartered Banking Group, combining their Asian and African networks under one parent company. As part of the merger, a new holding company for the South African operations called Standard Bank Investment Corporation (now Standard Bank Group Ltd.) was created in 1969. Then in 1970, Standard & Chartered Bank floated part of Standard Bank Investment Corp. on the Johannesburg Stock Exchange. By 1980, Standard Chartered’s holding in Standard Bank Investment Corp. had fallen to 58%, and this stake was to be reduced to below 50% by 1986 as required by the South African government.

Following the 1969 merger, the bank also began an ambitious expansion into the U.S. and Europe. Ironically, it was only in 1970 that the bank, which had started as the Chartered Bank of India, Australia and China more than 100 years earlier, was permitted to open a representative office in Australia. In 1975, the bank's name was shortened to Standard Chartered Bank.

Between 1968 and 1973, the bank acquired Hodge Group, a British financing firm specializing in installment credit and industrial leasing. Hodge Group was renamed Chartered Trust Ltd. in 1979. In the same year, Standard Chartered took over the Union Bank of California, gaining 60 branches and becoming the No. 5 bank in the state. An interesting fact about Standard Chartered is that it's the only bank in the Falkland Islands, having opened a branch in 1984 following the end of the Falkland Islands War between Argentina and Britain two years earlier.

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 divested its remaining 39% stake in Standard Bank Investment Corp. for USD $254-million to local South African interests. Standard Chartered Bank had the dubious reputation to be the last foreign bank to leave South Africa. The sale was the largest divestment by a foreign company at the time.

In 1986, Standard Chartered became the takeover target of British banking giant Lloyds Bank Ltd., when Lloyds launched a USD $1.95-billion bid for the bank. After enlisting the help from several Asian tycoons to buy up its shares, the bank was able to defeat the unwelcome advances from Lloyds. However, loan losses from the Third-World debt crisis in the late 1980s forced the bank to sell off most of its U.S. and European operations. In 1988, subsidiary Union Bank was sold to California First Bank for USD $750-million. California First Bank was a subsidiary of the Bank of Tokyo. Then in 1990, the bank sold its Austrian, Belgian, Danish, French, German, Italian and Dutch operations to Westdeutsche Landesbank (WestLB).

Recent transaction(s):

  • In 1999, Standard Chartered acquired 75% of Nakornthon Bank in Thailand for TBK 12.4-billion (USD $313-million). Nakornthon had 67 branches in Thailand.
  • Also in 1999, Standard Chartered acquired 89% of Lebanon’s Metropolitan Bank.
  • In 2000, Standard Chartered bought the Hong Kong retail banking and consumer card businesses from Chase Manhattan Bank for HKD $10.3-billion (USD $1.32-billion, GBP 825-million).
  • In 2000, Standard Chartered sold its Chartered Trust leasing and auto finance business to Lloyds TSB Group for GBP 627-million.
  • In 2000, Standard Chartered bought Grindlays Bank's South Asia and Middle East business from Australian and New Zealand Banking Group (ANZ Banking Group) for USD $1.34-billion (GBP 848-million). The purchase included 116 branches across 13 countries in the region.
  • In 2004, Standard Chartered and PT Astra International Tbk jointly acquired 63% of Indonesia’s PermataBank for USD $355-million.
  • In 2005, the bank acquired Korea First Bank for KRW 3.4-trillion (USD $3.3-billion). Korea First had 400 branches and more than 3.2-million retail clients in the country.
  • Also in 2005, the bank acquired a 19.99% stake in China's Bohai Bank for USD $123-million.
  • In 2006, Standard Chartered and PT Astra International acquired another 26% of PermataBank for USD $193-million, bringing to total ownership to 89%.
  • In 2006, the bank purchased 80.9% of Pakistan's Union Bank for PKR 24.9-billion (USD$ 416-million).
  • In 2006, Standard Chartered acquired Taiwan's 7th largest private-sector bank Hsinchu International Bank for TWD $39.40-billion in cash (USD $1.19-billion, GBP 636-million). Hsinchu's 83 branches would join Standard Chartered’s three-branch network.
  • In 2007, Standard Chartered bought 49% of India stockbroker UTI Securities Ltd. for GBP 18-million (USD $36-million).
  • In 2007, Standard Chartered bought American Express Bank Ltd. from American Express Co. for about USD $823-million (GBP 414-million). American Express Bank served 10,000 clients and provided services to financial institutions and affluent individuals. It operated 75 offices across 47 countries. Standard Chartered said the deal would strengthen its private banking operations, double the size its USD clearing business, as well as expand into the Euro- and yen- clearing markets.
  • In 2008, Standard Cahrtered sold its Standard Chartered Trustee Co. Private Ltd. and Standard Chartered Asset Management Co. Private Ltd., both based in India, to Infrastructure Development Finance Company (IDFC) for USD $205-million in cash.
  • In 2008, Standard Chartered  raised its stake in Vietnam’s Asia Commercial Bank to 15%. Standard Chartered first acquired an 8.84% stake in Asia Commercial in 2005.
  • In 2008, Standard Chartered agreed to acquire insolvent Taiwanese bank Asia Trust and Investment Corp. Asia Trust provided credit card services through its seven branches. Many Taiwanese banks had suffered devastating losses due to an explosion of consumer credit loans that had gone sour. As part of the agreement, Standard Chartered would receive a TWD $3.35-billion (USD $104-million) subsidy from the Taiwan government to take over Asia Trust’s operations.
  • In November 2008, Standard Chartered raised GBP 1.8-billion from a rights issue.
  • In December 2008, Standard Chartered raised its stake in India’s UTI Securities to 74.9%.
  • In February 2009, Standard Chartered bought Cazenove Asia Ltd. from JPMorgan Cazenove.
  • In August 2009, Standard Chartered announced that it was raising another GBP 1.0-billion (USD $1.7-billion) from its second rights issue with a year.
  • In October 2010, Standard Chartered once again issued rights to raise GBP 3.26-billion (HKD $40.1-billion, USD $5.16-billion) in fresh capital in order to meet Basel III capital rules.
  • In September 2015, Standard Chartered sold its Hong Kong Mandatory Provident Fund (MPF) and Occupational Retirement Schemes Ordinance (“ORSO”) businesses to Canada's Manulife Financial. Financial terms were not disclosed but was reported as about CAD $400-million (GBP 195-million, HKD $2.35-billion) according to some media.  The businesses sold had HKD $20-billion (CAD $3.4-billion, GBP 1.66-billion) of assets under management.

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