HSBC Holdings PLC $HSBA (+0,87%) announced on Thursday that it will temporarily suspend its share buybacks after making an offer to buy out the shares of minority shareholders of Hong Kong bank Hang Seng Bank Ltd. $11 (+0,6%) Hong Kong bank Hang Seng Bank Ltd.

As a result, the London-based Asian-focused bank's share price fell 5.8% to 1,004.60 pence per share on Thursday morning.

HSBC has offered HKD 155 per share, the equivalent of about USD 19.92, for the 37% of Hang Seng Bank that it does not yet own (63% so far).

The offer values Hang Seng Bank at HKD 290.31 billion and HSBC's stake at HKD 106.16 billion or USD 13.62 billion.

Hang Seng Bank shares closed up 26% at HKD 149.60 in Hong Kong on Thursday, giving it a market value of HKD 280.42 billion.

HSBC said the price reflected the potential value of Hang Seng Bank's business development in the next few years.

The FTSE 100-listed company expects the transaction, which will be funded from internal resources, to be accretive to earnings per ordinary share due to the elimination of the minority interest deduction related to Hang Seng Bank.

However, following the announcement of the transaction, the company will not undertake any further share buybacks for the next three quarters as it aims to bring its CET1 ratio back to the target range of 14.0% to 14.5%.

The decision to resume buybacks is subject to HSBC's usual considerations and procedures for buybacks on a quarterly basis, the bank added.

HSBC estimates the impact of the transaction on its CETI ratio to be approximately 125 basis points. HSBC's last published CET1 ratio was 14.6% as of June 30.

The bank said it continues to target a dividend payout ratio of 50% of earnings per ordinary share for 2025, excluding material exceptional items and related impacts.

HSBC said the privatization will allow it to better capture growth opportunities in Hong Kong and fully leverage both the HSBC Asia Pacific and Hang Seng Bank franchises.

"By privatizing Hang Seng Bank, HSBC can significantly simplify the structure of its Hong Kong operations, further align the economic incentives for HSBC to increase its investment in Hang Seng Bank, leverage both brands, while simplifying and streamlining decision-making processes to become more agile," the bank said in a statement.

The major British bank HSBC $HSBA (+0,87%) wants to delist its subsidiary, Hang Seng Bank $11 (+0,6%)completely from the stock exchange and has presented investors with an offer that has them rejoicing. The shares of the long-established Hang Seng Bank shot up by almost 30 percent at times on Thursday. In the early hours of Thursday afternoon local time, the shares were still up more than 26 percent on the Hong Kong stock exchange.

The deal values the bank at more than 290 billion Hong Kong dollars (equivalent to over 37 billion US dollars). HSBC, Europe's largest lender, is offering minority shareholders 155 Hong Kong dollars per share. This corresponds to a premium of around 33 percent on the 30-day average price of 116.5 Hong Kong dollars. As HSBC already holds 63 percent of the shares, the transaction volume amounts to around 106 billion Hong Kong dollars, according to the US news channel CNBC.

For HSBC itself, however, the announcement meant headwinds: its own shares lost over 6.5 percent in Hong Kong. Group CEO Georges Elhedery nevertheless spoke of a "great opportunity" to build on the strengths of both brands. Hang Seng Bank is to retain its independence, its name and its customer business, while at the same time being able to invest more in technology and product development.

The project is also seen as a signal of Hong Kong's importance in the global financial system. HSBC emphasized that the city remains the most important link between international markets and China. Industry observers also see the move as a long overdue solution, as the dual listing of parent and subsidiary companies has repeatedly raised governance issues.

However, Hang Seng Bank is struggling with problems. Due to the weakness in Hong Kong's and China's real estate sector, the proportion of non-performing loans has recently risen to 6.69 percent - a significant increase from 5.32 percent a year ago. Nevertheless, the acquisition remains a strategic step for HSBC to strengthen its presence in the core Hong Kong market and further reduce its dependence on Western markets.