Talks between Old Mutual and HSBC over the sale of Old Mutuals 51.5% stake in Nedbank has broken down, according to a report by the Financial Times.
Old Mutual and HSBC began discussing a potential deal in August 2010. According to a statement from Old Mutual at the time, HSBC was looking to purchase up to 70% of Old Mutuals shareholding in Nedbank. Nedbank Group’s initial assessment of the proposed transaction is that HSBC represents an attractive international banking partner and shareholder of reference and has the potential to provide Nedbank Group with benefits which should enhance Nedbank Group’s ability to strengthen its position in the South African banking sector, said the statement.
However, according to the FT, due diligence on the South African banks operations had proved more complex than expected.
HSBC’s two month period of exclusive talks with Old Mutual expires this weekend.
The move would match HSBCs desires to increase its presence in emerging markets. In the first six months of 2010, Hong Kong and the Asia-Pacific region accounted for 53% of the banks profits. Only the North American market saw a loss for HSBC.
Earlier in 2010, CEO Michael Geoghegan coined the phrase CIVETS to refer to the next emerging markets targeted for growth: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
A successful bid by HSBC would also offer competition to Barclays and Standard Chartered in the region. In 2005 Barclays bought a majority stake in Absa Group, the largest consumer bank in South Africa. Standard Chartered, the largest lender in Africa, recently bought the African custody business from Barclays Bank. Standard Chartered also purchased First Africa (an African M&A advisory business) in 2009 and opened a new representative office in Angola, its fourteenth African market, in early 2010.