Two UK banks eye Nedbank

Johannesburg - British banks' plans to take over banking group Nedbank are well advanced, if one is to believe the British media.

On Friday the possibility was again raised when the authoritative Financial Times of London (FT) reported that two British banking groups were negotiating with Old Mutual [JSE:OML] over its 52% stake in Nedbank Group [JSE:NED].

The paper's columnist Mark Kleinman reported that HSBC and Standard Chartered had already negotiated such a deal with Old Mutual.

This is the third time this year that this speculation is doing the rounds in London. It is well known that both banks want to expand their presence in emerging markets.

In May this year Sky News reported that Standard Chartered was interested in Nedbank, and shortly after that the same source reported that HSBC was putting out feelers for Nedbank.

In both cases Nedbank neither denied nor confirmed the reports.

John Bestbier, Nedbank group CEO for strategy, then said that over the years Nedbank had become accustomed to the rumours, and that the bank would not respond to market speculation.

But now Kleinman has reported that these talks have passed the exploratory stage.

As Sky News reported earlier this year, HSBC has already obtained the services of the Lazard advisers to assist with negotiations. Standard Chartered uses the services of Goldman Sachs.

It is also alleged that Old Mutual CEO Julian Roberts has called in a team of advisers to help find buyers for the Nedbank stake. Lexicon Partners, Merrill Lynch and Rothschild are apparently all involved in the project.

Analysts believe that it makes sense for Nedbank to be sold at some time or other. But the bank will not admit to these plans at this stage, as this would affect market prices.

A handy indicator of how far negotiations have progressed is when a bank issues a cautionary announcement. Neither Nedbank nor Old Mutual’s shares are however trading under such an cautionary.

Several issues first need to be ironed out – including whether the authorities would approve another foreign bank takeover.

To acquire a majority interest in Nedbank, a foreign bank would have to put up about $4.5bn (about R33.7bn) at a time when foreign banks' asset bases are under pressure.

Kleinman writes that the price could be a problem to Nedbank, and that whoever might be interested in buying control of Nedbank will probably have to do a rights issue to obtain additional capital.

Observers have also said there is a definite possibility that the South African government could put a spanner in the works.

And what might happen if Old Mutual takes too long to agree to such a proposal? FT says the much bigger HSBC could then consider the possibility of making a takeover bid for the whole of Old Mutual.

- Sake24.com

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