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HSBC Agrees To Acquire Bank Of Bermuda

28 28 2003

Hamilton, Bermuda: 28 October 2003 - Bank of Bermuda Limited ("Bank of Bermuda") and HSBC Holdings plc ("HSBC") announced today that they have entered into an agreement under which Bank of Bermuda will be acquired by HSBC, one of the largest banking and financial services institutions in the world, in a transaction valued at US$1.3 billion. Under the terms of the agreement, shareholders of Bank of Bermuda will receive a total of US$45 per Bank of Bermuda share in cash, comprising US$40 from HSBC and BM$5 as a special dividend from Bank of Bermuda which, under existing arrangements, may be received in US dollars. Bank of Bermuda will pay the special dividend to the shareholders of record immediately before the closing date. This total of $45 represents a 16.3% premium over the Nasdaq average closing price for the past three months.

The proposal has been approved by the board of directors of Bank of Bermuda and they will be recommending the proposal to Bank of Bermuda shareholders. Merrill Lynch has acted as financial advisor to the Board of Directors and issued a fairness opinion in connection with the transaction.

The proposal will be effected by an amalgamation under the Bermuda Companies Act and will be subject to approval by Bank of Bermuda shareholders at a special general meeting of Bank of Bermuda. The proposal is also subject to approval by the Bermuda Monetary Authority and to governmental and regulatory approval in other relevant jurisdictions and to certain other conditions.

The aim is to complete the transaction, assuming fulfilment of all conditions, by the first quarter of 2004.

Bank of Bermuda will remain headquartered in Bermuda and the Bank of Bermuda brand will continue to be used in conjunction with the HSBC symbol. Bank of Bermuda will continue to employ the majority of its present Bermuda workforce. Bank of Bermuda's Board of Directors will also continue in place and be joined by two HSBC representatives. The many potential benefits Bank of Bermuda will gain from the expanded market reach, product offerings and capital strength resources of one of the world's largest financial institutions will also benefit its customers, employees and communities. Where international operations overlap, Bank of Bermuda operations will be integrated with those of HSBC.

Bank of Bermuda will facilitate Bermuda resident shareholders who wish to do so to reinvest their cash consideration, other than the special dividend, by purchasing HSBC shares without brokerage commission. HSBC intends to apply for a listing for its shares on the Bermuda Stock Exchange.The transaction value provides a 16.3% premium to the three-month average Bank of Bermuda share price. In addition, through the facility mentioned above, Bermuda residents will also have the opportunity to invest in an HSBC Group that will include Bank of Bermuda.

Henry Smith, Chief Executive Officer, Bank of Bermuda, said: "This is a significant step for Bank of Bermuda, its shareholders, clients and employees. This agreement ensures our shareholders are rewarded for our global success in an increasingly competitive environment. As a small organisation, it is a growing challenge for our global businesses to deliver the quality, tailored service that is our hallmark in a manner that matches the efficiency of much larger institutions with significant economies of scale. By joining with HSBC, Bank of Bermuda will be able to bring our country enhanced services whilst maintaining our strong commitment and support of the Bermudian community as a service provider, employer and leading community donor.

Joseph Johnson, Chairman of Bank of Bermuda, said: "Our shareholders are being offered a proposal which we believe is in their best interests. It offers them a fair return for their investment and a significant premium over the recent average market price. Bermuda will benefit from having a major global player strengthening the reputation and quality of its local financial services infrastructure, and clients will see their services expanded and developed. Bank of Bermuda will also continue to be one of the leading sponsors of local charitable and community projects and events. The strategic and cultural fit between Bank of Bermuda and HSBC is compelling. We feel that this is the right agreement, with the right partner at the right time."

Iain Stewart, Group General Manager of HSBC, said: "This is a great opportunity for us to enter a premier banking jurisdiction with Bermuda's premier bank. We intend to provide Bank of Bermuda with the expertise and assistance both to grow within its home market and to seek to leverage that base to attract significant new business to Bermuda. We believe this will be beneficial to the overall economy, to consumers and to businesses, and is consistent with our philosophy to be the world's local bank."