HSBC agrees sale of majority stake in infra & real estate unit

The senior management of HSBC’s infrastructure and real estate arm, HSBC Specialist Investments, will buy an 80% stake in the unit from the parent bank. The management buyout is expected to be completed in the first quarter of 2011.

UK bank HSBC has agreed to sell a majority stake in its global infrastructure and real estate private equity fund management business – HSBC Specialist Investments (HSIL) – to the division’s senior management team.
The deal will see the unit’s senior management acquire an 80.1 percent stake in HSBC’s infrastructure and real estate arm, leaving the parent bank with a 19.9 percent holding in the unit. HSIL, which manages some $4 billion of assets in infrastructure and real estate, had consolidated gross assets of approximately $53 million at June 30 2010, HSBC said in a statement. HSIL is also the investment adviser to HSBC Infrastructure Company.
The buyout will not affect HSBC’s stakes in the funds HSIL manages, with the bank expected to continue to be a significant investor in HSIL’s future funds.
The management buyout had been announced in June this year and was largely seen as a move to pre-empt expected regulatory changes that will impact banks’ ownership of private equity vehicles.
Although discussions are still ongoing and there is no official requirement for HSBC to sell off its private equity businesses, proposals such as the US’ Volcker rule, which could see banks having to choose between running private equity operations and taking deposits, are seen as a sign of a changing regulatory environment.
While HSIL is the largest of HSBC’s private equity divisions, HSBC had previously said that it was also holding talks with the “management teams of its private equity fund management businesses in Hong Kong, USA, Canada and the Middle East which could lead to five separate management buyouts”.