HSBC has agreed to sell its business in Canada to Royal Bank of Canada for $10.04 billion.
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Noel Quinn, the bank's boss, said: 'We decided to sell following a thorough review of the business, which assessed its relative market position within the Canadian market and its strategic fit within the HSBC portfolio.'
The sale of HSBC's arm in Canada is expected to complete late next year and will result in a pre-tax gain of $5.7billion for HSBC, according to the bank.
The transaction will unlock 'significant value' for the group, HSBC said in a stock market statement.
Under the terms of the Share Purchase Agreement dated 29 November 2022, RBC will acquire 100% of the issued common equity in HSBC Canada from HSBC Overseas Holdings UK, a wholly owned subsidiary of HSBC Holdings, for a base cash consideration of CA$13.5bn ($10.1bn).
In addition, RBC will acquire all the preferred shares and the outstanding subordinated debt issued by HSBC Canada and held by the HSBC Group at their closing par value (including accrued interest and dividend entitlements), which as at 30 June 2022 were approximately CA$1.1bn (US$0.8bn) and CA$1.0bn (US$0.7bn), respectively.
The base cash consideration for the issued common equity is subject to a customary leakage adjustment.
There will also be an adjustment for additional equity capital contributions made to HSBC Canada.
As at 30 September 2022, the carrying value of HSBC Canada attributable to ordinary shareholders recognised in the Company’s consolidated financial statements was US$3.4bn and the total amount of the preferred shares and subordinated debt outstanding were US$0.8bn and US$0.7bn respectively.
Consideration for the sale will be settled at completion in cash, currently anticipated to be in late 2023, subject to regulatory and governmental approvals and following completion of migration steps. ■
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