HSBC Holdings Plc on Sunday said it plans to shed nearly half of its underperforming U.S. branch network, selling 195 branches to First Niagara Financial Group Inc for about $1 billion, and closing 13 others.
The all-cash sale to First Niagara includes 183 branches in upstate New York, six in New York City suburbs and six in Connecticut, and includes $15 billion of deposits.
It would significantly increase the size of Buffalo, New York-based First Niagara, which expects to have about 450 branches and $30 billion of deposits. A closing is expected in early 2012, pending regulatory approvals.
HSBC in May said its U.S. banking unit HSBC Bank USA had a "record of underperformance" relative to internal targets, and that it would try to shrink its retail branch base to focus on areas with "strong international connectivity."
It said the 13 branches to be closed are located in Connecticut and New Jersey, and are near other HSBC branches. The company said it has more than 470 branches in the United States, including about 370 in New York.
"HSBC is committed to the U.S. and leveraging our international network and skill-set, which are our competitive advantages," Niall Booker, chief executive of HSBC North America, said in a statement.
First Niagara said the transaction also includes $2.8 billion of loans and $4.3 billion of assets under management.
The transaction "gives us an optimal footprint in upstate New York and additional depth in Connecticut," First Niagara Chief Executive John Koelmel said in a statement.
First Niagara said antitrust regulators will probably require it to divest some branches, including in western New York state.
It expects the transaction to boost operating earnings, after merger costs, 10 percent to 11 percent in 2012. It also plans to issue $750 million to $800 million of stock and $350 million to $400 million of debt.
First Niagara said it was advised by Goldman Sachs & Co, Sandler O'Neill & Partners LP and the law firm Pepper Hamilton, while HSBC was advised by its own investment bankers, JPMorgan and law firm Sullivan & Cromwell.
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