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HSBC may revamp deal
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November 4, 1999: 12:34 p.m. ET
Republic founder may cover possible fraud settlements, clearing $10.3B buyout
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NEW YORK (CNNfn) - British-based banker HSBC Holdings Plc is closing in on a revised deal to buy Republic New York Corp. after the original $10.3 billion purchase was put on hold amid a trading scandal, according to reports Thursday.
London-based HSBC first announced the deal in May, only to step back in September after a market forecaster with close ties to Republic was charged by federal prosecutors with fraud.
The reports said the proposed deal now centers on the Lebanese billionaire and Republic founder Edmond Safra, who retains a 29 percent stake in the bank and stands to pocket nearly $3.2 billion through the buyout.
Media reports suggested that Safra would place $1 billion of his proceeds into a special account to pay for the settlement of any potential future claims from Republic clients arising from the allegations.
Neither bank commented on the reports. Melissa Krantz, a Republic spokeswoman, said only, "We are continuing to have conversations toward closing the transaction," and declined to comment further.
The charges center on alleged fraudulent inflation of futures products Republic marketed to customers in Japan through a New Jersey-based market forecaster named Martin Armstrong. The scandal led to losses that could run as high as an $1 billion, although Armstrong has said that's too high a figure.
Republic itself is not charged with any wrongdoing, and other observers believe any claims against it will be minimal.
The U.S. bank's stock has floundered since the scandal broke, though Armstrong and others who may be involved deny the allegations. The affair has caused a frenzy among arbitrageurs, who speculated that HSBC will lower its final offer.
However, Thursday's reports suggested that it will still be priced at $72, as first planned. That helped to revive what has been a battered Republic stock in the last few months. In early trading Thursday, Republic (RNB) shares rose 3-13/16 to 68-1/2.
"There appears to be a lot of willingness to get it done," said one arbitrageur. Republic said it hopes to have a deal done by Nov. 20 so it can mail proxy materials to shareholders. "The issue is how it gets wrapped up," the arb added.
Last month, Republic delayed a vote by shareholders on the HSBC proposal for a third time; now that vote is expected to take place on Nov. 30.
American depositary receipts of HSBC (HBC), an international titan which owns Britain's Midland Bank and Hong Kong and Shanghai Bank, climbed 1-1/8 to 62. In London, shares of HSBC (HSBA.L) were up 26 pence to 757, or about 3.6 percent.
The Japanese trading affair appears to be unrelated to a probe by U.S. and Russian officials into alleged Russian money-laundering through accounts at Republic and rival Bank of New York.
-- from staff and wire reports
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