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HSBC nabs CCF for $10.6B
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April 2, 2000: 12:35 p.m. ET
London giant taps euro zone, rich client base in France in latest banking merger
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LONDON (CNNfn) - Global banking giant HSBC Holdings has agreed to purchase Crédit Commercial de France for at least  11 billion ($10.6 billion) in cash and stock, seizing a coveted major French bank in the latest of a raft of consolidation moves in Europe's financial sector.
As part of the transaction, which the board of CCF approved late Saturday, CCF shareholders will receive either 150 euros in cash for every CCF share, or 13 HSBC shares in stock, for each CCF share that they own.
The cash offer amounts to about a 15 percent premium to shares of CCF (PCCF) which closed Friday at 130.5 euros per share, up 0.8 percent. Shareholders who opt for HSBC shares rather than cash will receive about a 22 percent premium - because investors tend to prefer cash to stock. HSBC (HSBA) shares closed up 1.7 percent at 741 pence in London Friday.
HSBC's purchase, which will vault Britain's largest bank into the 11-nation euro zone via France, amounts to the latest in a merger wave in banking as companies work to cut administrative costs and improve their loan portfolios. The deal still faces regulatory approvals in France, where regulators have had a hand in deciding the fate of previous merger efforts in the banking arena. The companies expect savings of about 150 million euros (143.4 million), after-tax, by 2001.
Eyeing a richer, European footprint
Through the purchase, HSBC will achieve several strategic goals: landing a foothold in the 11-nation euro zone and acquiring the well-heeled clients that are a key feature of CCF's portfolio.
"If the outcome of our offer for CCF is successful, we shall have a unique opportunity to build a platform in the euro zone, where we have been under represented," said HSBC Group Chairman John Bond in a statement. "It will also significantly increase our wealth management business, one of the key objectives of our strategic plan, and expand our ability to meet the needs of our global corporate and institutional clients," Bond added. 
HSBC, which was founded in Asia and now has a market capitalization of $100 billion, wants to broaden its revenue base to achieve a better balance between richer nations and emerging market economies. It ranks as No. 3 in market value among financial services companies worldwide, after U.S.-based Citigroup (C: Research, Estimates) and Morgan Stanley Dean Witter (MWD: Research, Estimates).
HSBC has its headquarters in London. The bank has about 30 million customers worldwide and assets $569 billion.
For their part, CCF executives will gain a French fiefdom under the vast HSBC umbrella. For Chairman Charles de Croisset, the deal puts an end to the uncertainty surrounding the medium-sized bank. He will remain in charge of CCF in Paris and will take a seat on the HSBC board.
The French bank will also gain access to HSBC's vast network of financial service offerings, and will accelerate its online banking initiatives with support from the technological know-how of HSBC.
While CCF has only the eight-largest retail network in France with 650 branches, it is the most profitable one. The bank has one million high-net worth clients and has long been seen as attractive prey for any bank wishing to expand in France.
The latest in banking merger wave
Banking sector consolidation has been rampant, not only in Europe. The German bank Deutsche Bank (FDBK) three weeks ago agreed to buy compatriot Dresdner Bank (FDRB) for about $32 billion, while many top Japanese banks have been merging over the last two years.
HSBC itself has been a key player, recently wrapping up its $10 billion purchase of Republic New York. The London-based bank had been also seen as a potential buyer of Germany's Commerzbank, but executives at HSBC said further buyouts in the 11-euro zone aren't on its agenda now.
Dutch financial services company ING, which already holds 19 percent of CCF and led a failed bid last year to buy the French bank, had been widely seen as the likely winner. But ING said it was now happy to sell and will land a handsome 900 million euros in pre-tax profit through the sale to HSBC.
Recognizing the importance of drawing in French regulators, Bond and Croisset said they spoke with the Bank of France's governor, Jean-Claude Trichet, on Saturday after the HSBC board had approved the offer and before the CCF board vote.
The Bank of France reportedly aired objections to the ING bid for CCF late last year - suggesting HSBC was aware of the importance of placating that critical regulatory panel. Trichet got involved in the acrimonious, but ultimately successful, battle led by France's BNP to wrest Paribas from merger partner Société Generale.
If the takeover happens, CCF will be the first of France's major retail banks to fall into foreign hands. However, CCF is very international already. Aside from ING's stake, about 19-percent of CCF's shares are owned by Swiss Life and another 14.5 percent are owned by Belgium's KBC Bancassurance.
ING, Swiss Life and KBC have all been gradually increasing stakes in CCF since the beginning of 1999.
An industry source told Reuters HSBC's activities in France would be folded into CCF while the French bank's investment bank, CCF Charterhouse, would be integrated with HSBC.
The source said HSBC had made the first move, adding that there would probably be a small number of job losses. The deal was expected to produce 150 million euros in cost savings by 2001. 
-- from staff and wire reports
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