
Small Is Beautiful
Encouraged by government stimulus programs, banks are finding new ways to finance SMEs. Once the economy recovers, will the surge of interest recede?
THE AMERICAS HSBC Extends Reach Among US Consumers
HSBC Holding agreed to buy Household Interna-tional, the largest indepen-dent consumer finance company in the United States, in a stock-swap transaction valued at $15.3 billion, extending the bank’s relationship to one in five Americans.
Household will bring the London-based bank, the world’s third-largest financial institution, some 50 million mostly lower-middle-income customers in North America.The transaction was the largest financial-services merger of 2002 and the year’s sec-ond-largest acquisition, after Pfizer’s $60 billion acquisition of Pharmacia.
“This deal brings together one of the world’s most successful deposit gatherers with one of the world’s largest gen-erators of assets,” says Sir John Bond, HSBC Group chairman.The acquisition meets HSBC’s stated goal of growing consumer assets while enabling Household to gain access to lower-cost funding.
Bond sought to reassure investors that Household has changed its aggressive lending policies. Last Octo-ber, under a nationwide settlement with state attor-neys general, the consumer finance company was forced to pay back $484 million to low-income borrowers who were allegedly duped into taking out high-interest-rate loans. A New York-based con-sumer group, Inner City Press/Community on the Move, is urging federal reg-ulators to block the trans-action on the grounds that Household overcharged some borrowers with records of late payments.
William Aldinger, chair-man and CEO of House-hold, which is based in the Chicago suburb of Pros-pect Heights, says the mer-ger will enhance the oppor-tunities for the consumer lender to build its business through HSBC’s financial strength and extensive product range.Aldinger will become chairman and CEO of a new holding company of the enlarged group in the United States by the end of 2003.
Household’s main sub-sidiaries, Household Finance and Beneficial, make home-equity and unsecured consumer loans. Household also provides private-label credit cards to companies such as Best Buy and Home Depot.
Rating agencies gener-ally reacted positively to news of the deal, reaffirm-ing HSBC’s ratings and announcing that they were considering an upgrade for Household. HSBC is paying about 1.7 times Household’s book value, representing a 34% premium over where Household’s shares traded before the announcement.
EUROPE Benetton Family Seeks Autostrade
Schemaventotto, in which the Benetton family’s Edi-zione Holding investment vehicle owns 60%, planned to launch a tender offer to acquire Autostrade, the Rome-based highway oper-ator, for $7.8 billion.
Autostrade oversees 1,930 miles of freeways in Italy, representing 60% of the country’s toll-road net-work.The company is building highways in Washington, DC, and Birmingham, England. It also leases fiber-optic net-works along its routes.
Schemaventotto already owns about 30% of Autostrade. If it gains con-trol of the highway opera-tor, it plans to transform it into a holding company. Operating subsidiaries would manage and main-tain highway construction, telecommunications, infor-mation services to drivers and parking concessions.
The planned acquisition of Autostrade is part of the Benetton family’s diversifi-cation strategy that is moving it away from the clothing business.
—Gordon Platt