LONDON HSBC Holdings PLC is seeking investor backing to issue new shares worth as much $24.3 billion, which may be used to finance acquisitions.
In a letter to shareholders, Europes biggest banking company by market value and the worlds second-largest after Citigroup Inc. said it will ask for approval to create as many as 1.9 billion new shares 20% of its existing capital at its May 25 annual meeting in London.
HSBC, which a company spokesman said has made similar requests of shareholders in the past, spent $19.6 billion to buy Credit Commercial de France SA and Republic New York Corp. over the past two years and may be preparing for another deal, analysts said.
Theyre always on the prowl, said Terry Chan, director of financial services ratings at Standard & Poors in Hong Kong. If theyre taking more capital on board, theyve got someone in their sights.
Analysts have speculated that HSBC, which has a market value of $116 billion, may want to buy Merrill Lynch & Co., whose $52.6 billion market value makes it the largest U.S. retail brokerage firm by that measure. HSBC and Merrill last year started a $1 billion Internet joint venture to market financial services to wealthy clients outside the United States.
Its no secret HSBC wants to make an acquisition if the price is right, said Arthur Lau, an associate director for Asian financial institutions at the credit rating company Fitch Hong Kong Ltd.
HSBC, which operates in 79 countries, generated 53.5% of its 2000 operating income from Europe, 26% from Asia, 11.9% from North America, and 8.6% from Latin America.
In an interview, the spokesman, Adrian Russell, said HSBC has no immediate plans to issue any new shares. In the March 26 letter accompanying notification of its annual meeting, HSBC said that the need for such an issue of shares could arise, for example, in the context of a transaction (such as the acquisition of a company) which had to be completed speedily.
HSBC is also seeking permission to increase by 43% its so-called authorized share capital the pool of shares it could issue, if granted permission.
HSBC wants to increase the authorized share capital by 4.5 billion shares, though it said it would only issue the shares with the authority of shareholders. HSBC helped pay for its $11 billion purchase of Credit Commercial de France last year by selling $8.6 billion of its own shares. Its $9.85 billion purchase of Republic New York in December 1999 made HSBC the third-largest retail bank in New York.