KBC Group has reached an agreement with Daiwa Capital Markets for the sale of its global convertible bond and Asian equity derivatives businesses for a total consideration of approximately USD1bn.
The price consists of approximately USD0.2bn for staff, IT infrastructure and other assets (excluding the trading position) and approximately USD0.8bn for the trading position.
The firms say the acquisition forms a foundation for Daiwa’s growing derivatives business whilst freeing up capital resources for KBC in the amount of USD0.2bn.
In November 2009, Daiwa Capital Markets, the investment banking arm of Japanese brokerage and financial services company Daiwa Securities Group, announced plans to significantly grow its global markets operations including derivatives. This acquisition represents a significant step towards executing this strategy, and the firm intends to grow the acquired businesses, integrating them into its existing derivatives franchise.
The businesses being acquired by Daiwa employ approximately 150 staff across offices in London, New York and Hong Kong.
The businesses, platform and operations will be maintained in their entirety by Daiwa and will report to Daiwa’s global head of derivatives, Dominique Blanchard.
In the Asia Pacific region KBC Bank will continue to concentrate on corporate banking including lending, trade finance and treasury sales for core clients with links to KBC’s home markets in Europe.
Over the last two years, KBC’s global convertible bond and Asia equity derivatives business generated an average contribution to the underlying net result of KBC Group of two per cent.
The transaction will release approximately USD0.2bn in capital for KBC, resulting in an increase in KBC’s tier-1 ratio of ten basis points.
The closing of the transaction is subject to regulatory approval and is expected to be completed by early in the fourth quarter of 2010.
Jan Vanhevel (pictured), chief executive of KBC Group, says: “The agreement announced today marks another important step in KBC’s strategy to wind down the structured products business within KBC Financial Products. This divestment frees up substantial capital resources while further reducing our group’s risk profile and strengthening the group’s focus on its core bancassurance markets and expertise. We are convinced that Daiwa will enable the business to grow, while securing the future of the staff of these businesses and maintaining excellent customer service levels.”
Toshinao Matsushima, global head of markets at Daiwa in Tokyo, adds: “We are very pleased to welcome KBC’s global convertibles and Asian equity derivatives business into our group. Last November we announced plans to globalise our offerings, centering our efforts on the growing Asian markets. With this acquisition we demonstrate our commitment not just to growing in Asia, but also to building a globally competitive derivatives business. The acquisition cements and accelerates our plans to become a major player in the Asian equity derivatives and global convertible bonds space. We intend to ensure that their customers continue to receive the same outstanding service from a motivated and highly-specialised staff working as part of one of Japan’s leading financial services companies.”
