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LONDON — British bank HSBC Holdings PLC said Monday it is in talks with financial group Old Mutual PLC to buy a controlling stake in Nedbank Group Ltd. of South Africa in a deal worth as much as $6.8 billion.
Old Mutual said the discussions center on the sale of a 70 percent stake in Nedbank, South Africa's fourth-largest banking group in terms of total assets.
Shares in Old Mutual were up 4.9 percent at 126.9 pence in early trading on the London Stock Exchange. HSBC shares were fractionally higher at 634.4 pence
Old Mutual said the proposed sale, if agreed and approved by regulators and shareholders, would be a major step in its strategy to simplify its business. Proceeds would be used to reduce debt and make new investments in South Africa.
The sale "is likely to result in a material strengthening of South Africa's financial sector, foreign direct investment by HSBC in the banking sector and material incremental investment by Old Mutual in the long-term savings sector," Old Mutual said in an announcement to the London Stock Exchange.
Ian Gordon, analyst at Exane BNP Paribas, said regulatory clearance of such a deal is not certain although South Africa has no rules prohibiting foreign companies from acquiring a stake of this size.
"Barclays was limited to 53.96 percent of ABSA in 1985, (Chinese bank) ICBC acquired only 20 percent of Standard Bank in 2007, and recent indications have suggested limited appetite to permit further majority acquisitions by International banks," Gordon said.
"So this is not yet a done deal."
Bruce Packard, analyst at Seymour Pierce, agreed that regulatory clearance may be difficult, but he said the acquisition would be positive for HSBC. He noted that HSBC now has about $43 billion of excess capital relative to the lower end of its Tier 1 capital target of 7.5 percent to 10 percent.
A statement from Nedbank said HSBC would be "an attractive international banking partner" which could enhance Nedbank's ability to bolster its position in the South African banking sector.
"Nedbank Group believes that there is a substantial opportunity for it to expand both within the South African and African markets in due course," Nedbank said.
On Aug. 6, Old Mutual announced the sale of its U.S. life business to Harbinger Capital for $350 million. It has also said it intends a partial float of its U.S. asset management business.
Old Mutual was founded in 1845 in South Africa as the Mutual Life Assurance Society of the Cape of Good Hope. It is listed on stock exchanges in London, Johannesburg, Zimbabwe, Malawi and Namibia.
