HSBC’s plans to take Hong Kong’s Hang Seng private backed by board committee

HSBC’s plans to take its Hong-Kong-listed business Hang Seng private have taken a step forward after winning the approval of a board committee.

The independent committee, set up by Hang Seng’s board of directors, said it believes the proposed privatisation to be “fair and reasonable”.

It is therefore recommending that shareholders vote in favour of the proposals.

HSBC unveiled plans in September to take the troubled lender private in a deal valuing the subsidiary at 290 billion Hong Kong dollars (£27.9 billion).

It already owns around 63% of Hang Seng and was proposing to pay about 106.2 Hong Kong dollars (£10.2 billion) to buy out the remaining shares for 155 Hong Kong dollars per share (£14.91).

The banking giant said it would keep the Hang Seng brand and branch network following the proposed deal.

Shareholders will vote on the proposals on January 8, with Hang Seng set to be delisted from the Hong Kong Stock Exchange on January 27 if it is approved.

Hang Seng, which was founded in 1933, is one of the largest domestic banks in Hong Kong.

It was bought by HSBC in 1965, marking a milestone deal for the group at the time, but the subsidiary has struggled in recent years after being hit hard by Hong Kong’s property slump and seeing rising bad debts.

The lender has reported declining profits in recent months and raised its provisions in the face of the threat of tariff hikes, higher interest rates and the prolonged downturn in the commercial property market.

HSBC has been steaming ahead with an overhaul of the structure of the bank under the leadership of chief executive Georges Elhedery.

He has reorganised the bank into four new divisions and pulled out of some businesses.

It is also seeking to cut business costs by 1.5 billion US dollars (£1.1 billion) by the end of next year.