Standard Chartered Bank's Acquisition of American Express Bank (A)
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Case Code: BSTR347 Case Length: 18 Pages Period: 2007 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Standard Chartered Bank, American Express Bank Industry: Banking, Financial Services Countries: UK, USA Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
"It looks like a good deal for Standard Chartered, they should be able to grow the business quite nicely and it will help lift the private-banking side."
- Mike Trippitt, Analyst, Oriel Securities Limited (London), in 2007.
"This transaction represents an exciting development for the customers and employees of AEB. Becoming part of a major global financial institution whose primary focus is on international banking will afford attractive expanded opportunities for our business."
- W. Richard Holmes, Chairman and Chief Executive Officer, American Express Bank, in 2007.
Introduction
On September 18, 2007, the UK-based Standard Chartered Bank (StanChart) entered into an agreement with American Express Company (American Express) to acquire its international subsidiary, the Miami, US-based American Express Bank (AEB), for about US$ 860 million, subject to regulatory approvals. Analysts were of the view that the acquisition would enhance Standard Chartered's businesses by adding scale, capability, and much needed momentum in two of its strategically important and highly profitable businesses - clearing and private banking. In the case of the clearing business, the acquisition was expected to catapult StanChart from the eighth largest player in the world to the sixth largest player by doubling its dollar clearing business.
This was the biggest acquisition made by StanChart since September 2006 when it had acquired Taiwan's Hsinchu International Bank for US$ 1.3 billion. Analysts were of the view that the AEB deal fit in well both strategically and financially with StanChart's operations.
Cubillas Ding, an analyst at Celent5, opined, "The deal appears to be defensive against the likes of UBS, Credit Suisse, and City Group Inc., which are focusing their private banking businesses on Asia aggressively." Lehman Brothers6 reiterated its ‘overweight' rating for StanChart as its traditional banking and private banking business were expected to benefit from the acquisition.
For American Express, this deal signified divestment from their non-core business and a greater focus on their core businesses - credit card and travel payment. Analysts at Citigroup8 opined that with the sale of AEB, American Express could free up its investments, to invest in high return businesses.....
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