Standard Chartered's Acquisition of American Express Bank (B)
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Case Code: BSTR350 Case Length: 12 Pages Period: 2007-2009 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 |
Abstract Case Intro 1 Case Intro 2 Excerpts
"It was a bold move for us and we knew it would help catapult us into the top league of wealth management, particularly as emerging markets were becoming so important in wealth creation."
- Peter Flavel, CEO, Standard Chartered Private Bank, in May 2008.
"This transaction fits two of our key businesses. It turbo-charges our private banking business, advancing it by two to three years, and it more than doubles our financial institutions' business."
- Richard Meddings, Finance Director, Standard Chartered Bank, in September 2007.
Introduction
In May 2009, the UK based Standard Chartered Bank (StanChart) announced that it would be hiring 100 relationship managers to expand its private banking division. This announcement came amid the news from several financial institutions the world over about downsizing their staff because of the global economic slowdown.
StanChart started its private banking initiative in June 2007. It was awarded the Global Best Private Bank for the year 2008 by Euro Money. The award was presented in recognition of the bank's risk management practices, focus on growth markets, achievements in performance, growth in client base and commitment to client service.
StanChart Private Bank (SCPB) was a part of StanChart Consumer Banking division. It served clients with investable assets of over US$ 1 million (Refer to Figure I for Organization Structure of StanChart). With 150 years of presence in Asia, StanChart derived most of its profits from Asia.
It had set up the headquarters of its Private Bank in Singapore. Focus on emerging markets, good risk management and liquidity management practices helped StanChart face the global economic slowdown more efficiently as compared to its competitors who had a significant presence in developed countries which were reeling under recession.
StanChart started its private banking initiative on an aggressive note by launching SCPB in 11 locations within five weeks starting June 2007 which was exceptional in private banking industry.
Within a few months of starting its operations, StanChart announced that it would acquire American Express Bank (AEB) from American Express Company (AmEx) by paying US$ 300 million plus net asset value of AEB at the completion of the acquisition.
As a part of the deal, AmEx and StanChart also entered into a put/call option arrangement under which AMEX could sell and StanChart could buy American Express International Deposit Company (AEIDC) after 18 months of completion of the AEB acquisition. The price StanChart would need to pay AmEx for acquiring AEDIC would be the net asset value of AEDIC at the time of exercising the option...
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