decided to spend as much as $630 million of his own money to save his reputation and keep alive HSBC Holdings PLC's bid to buy Republic New York Corp.
As a result of an agreement reached Monday morning at 2:00 in New York, HSBC agreed to go ahead with its planned acquisition of Republic.
HSBC will pay $72 a share -- the same price agreed to in May -- to all shareholders except Mr. Safra. The New York holding company's honorary chairman and biggest shareholder, with a 29% stake, said he would reduce his take by $450 million, to $57.41 a share. The total deal price fell to $9.85 billion, from $10.3 billion.
In addition, Mr. Safra agreed to pay up to $180 million should the bank be found liable for its relationship with Martin A. Armstrong, a money manager accused of securities fraud. Mr. Armstrong, a client of Republic's securities unit, was accused in September of defrauding Japanese investors of as much as $1 billion.
Analysts and bankers said the move by Mr. Safra suggests that the banker's frailties -- he is ailing with Parkinson's disease -- and a weakened bargaining position finally forced his hand. But the personal concessions hark back to the days of J.P. Morgan, who earlier in the century often stepped into financial crises, both public and private, and provided millions to help companies and countries from unraveling.
"I cannot remember a time when someone has done that," said Thomas Stone, credit analyst at Duff & Phelps in Chicago. "This is like the days of J.P. Morgan who supported some of his deals in the early 20th century."
Mr. Safra, who declined to be interviewed Monday, said in a statement: "I am taking this action because I believe that a swift completion of the transaction will be to the benefit of Republic's clients, shareholders, and employees to whom my life's work has been devoted."
"Now, that's something," said Samuel Hayes, professor emeritus of finance at Harvard Business School. "Usually you think of a controlling interest in getting a premium. It's one thing to not get a control premium, but to take a controlling share at a discount is unheard of."
The concessions may have been hard to get. A source close to the negotiations between the banking companies said that though a basic agreement was in place Wednesday of last week, Mr. Safra initially balked at accepting any more potential liability than was built into his $450 million discount.
Even Mr. Safra's admirers were surprised -- "not that he stepped up, but how much he stepped up with," said a source in the negotiations. "But don't be fooled. It was certainly in his interest to get this done. It's not a total gift."
As to what influenced Mr. Safra, 67, to put up to $630 million on the line to see the deal through, observers speculated that he was thinking about a legacy -- and following a code that was once the hallmark of private banking.
"In a way it's just P.R.," said Marni Pont O'Doherty, an analyst with Keefe, Bruyette & Woods Inc. "But it's also personal character. Someone who has the wherewithal (to do this) knows private banking relies on character, someone who can say, 'I'm going to do what I have to do to get the deal back.' "
But sources say Mr. Safra was in many ways forced to the table.
If HSBC walked away from the deal, there was talk in Republic that the bank would be seen as "damaged goods." Said one Republic source, "It was a really easy decision."
Ultimately, "the only other option would be to roll up his sleeves and solve the problem for the bank himself," Prof. Hayes said. Mr. Safra "is simply too tired to get involved in that. I could see why this would look like a daunting thing to him."