Dutch-Belgian financial services group Fortis said on Thursday that the Hong Kong arm of China's biggest lender will pay HK $2.16 billion (US $276.5 million) to buy most of its local banking operations, accelerating consolidation of the city's crowded banking sector.
The Industrial & Commercial Bank of China (Asia) will buy the retail and commercial operations of Fortis Bank Asia (HK) for 1.05 times net asset value, Fortis said in a statement.
ICBC (Asia) will pay Fortis HK $1.545 million in cash plus 81.75 million new shares worth HK $612 million. The shares will represent nine percent of its enlarged share capital.
After the purchase is completed, ICBC (Asia) will become the sixth largest bank in Hong Kong with combined assets exceeding HK $95 billion and total customer deposits of HK $60 billion. Its branch network will grow from 20 to 42.
Fortis will also retain a nine percent stake in the combined business.
ICBC (Asia) and Fortis announced a memorandum of understanding in August but did not disclose terms of the deal, which remains subject to shareholder and regulatory approvals.
"ICBC (Asia) is strong in corporate banking while FBAHK has a respectable retail and commercial banking franchise," ICBC (Asia) Managing Director and Chief Executive Officer Zhu Qi said in a statement.
"The two are complementary in various areas including customer base, network coverage, profit portfolio and business profile."
Hong Kong's banking sector has seen several steps toward consolidation in the last year.
In August, Japan's Mizuho Financial Group agreed to sell its Hong Kong unit to Wing Hang Bank Ltd for $615 million.
Taiwan's Fubon Financial Holding Co in September offered $553 million for Hong Kong's International Bank of Asia, although earlier this month Fubon said the deal has been delayed because undisclosed conditions were not satisfied.
The acquisition will diversify the revenue stream of ICBC (Asia) stream with more contributions from retail operations and small and medium-sized business lending.
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