The Hongkong and Shanghai Banking Corp. is considering taking "a significant equity position" in Marine Midland Banks Inc., holding company for the 13th largest U.S. bank.
The two banks said yesterday they were "conducting exploratory discussions" on the possible investment.
Should the investment take place, Wall Street analysts said it will help improve the capital position of Marine Midland, which in 1975 sliced its divident and was being monitored by federal banking regulators for problem loans. And it will give Hong Kong's largest bank a stronger presence in this country.
"It can't hurt either side," said John J. Mason, banking analyst with Loeb Rhoades, Hornblower & Co. Mason called the announcement "an interesting positive development for Marine Midland" but "nothing to get too excited about." He predicted the financing will take the form of a preferred stock issues, because Marien Midland's common stock is trading well below book value.
The Hongkong and Shanghai Banking Corp. (HSBC) is one of the world's largest and most profitable banking companies, with assets exceeding $17 billion and 1977 earnings of $113 million.
Marine Midland, based in Buffalo, N.Y., had assets of $12.1 billion at the end of 1977 and deposits of $10.2 billion. Operating earnings last year totaled $17.6 million, more than double the 1976 total of $8.2 million, continuing the bank's rebound from its 1975 troubles. Those troubles were attributed largely to its loss-ridden London banking operation.
HSBC has had a U.S. presence for more than a century. Offices in San Francisco were opened in 1875, and the Hongkong Bank of California, a subsidiary, was formed in 1955. It now has offices throughout California. A New York branch of the parent bank was opened in 1879. More recently, the bank has opened representative office in Seattle, Chicao and Houston.
Because U.S. bank holding companies are limited to branching within a single state, the trancontinental presence of HSBC could create some regulatory impediments if the purpose of its contemplated investment in Marine Midland is to widen its foothold in the New York market significantly, several analysts observed.
Although HSBC is anchored in the Asia/Pacific region, where it has more than 270 offices, it has a number of wholly owned subsidiaries in other parts of the world, including the British Bank of the Middle East, the dominant British bank in the area, and Merchantile Bank Ltd, the oldest bank on the Indian subcontinent.
It also owns Wardley LTD., a merchant or investment bank with headquarters in Hong Kong. And the parent Hongkong bank group also controls extensive shipping and airline interests, including Cathay Pacific Airways, and owns Hong Kong's largest English-language paper, the South China Morning Post.
The bank was established in Hong Kong in 1865 and was the first British bank to be incorporated with a head office in the Far East. Ownership of the band is described as "broadly based," with an estimated 50,000 shareholders spread around the world.
The Hongkong and Shanghai-Marine Midland talks were disclosed during a busy day of takover and merger news that included:
A notification from the State of Utah's Department of Business Regulation to Curtiss-Wright Corp. that the agency has determined the company violated Utah takeover law in buying stock of Kennecott Copper Co. Immediate compliance was demanded under threat of a state lawsuit against Curtiss-Wright.
Pet Inc. of St. Louis reached an agreement to acquire Hardee's Food Systems Inc. in exchange for a fractional share of Pet common stock. Pet will exchange stock with a market price of $20.50 for each share of Hardee's, which has 1,056 restaurants.
Combined Communications Corp. called off talks with a larger company about a proposed combination of the firms.
Kaiser Cement & Gypsum Corp. agreed to sell nearly all its gypsum business assets for $34.5 million in cash to Domtar Inc. of Montreal.
About two-thirds of the approximately 10,000 employes of Kennecott Copper Corp's metals operations are employed in Utah, and the state also contains Kennecott's biggest copper mine and smelter.
Last Monday, Curtiss-Wright, a maker of aircraft parts, nuclear components and other industrial products, disclosed that it had accumulated a 9.9 percent interest in Kennecott for an aggregate $77 million, mainly through market purchases over the past 60 days.
Curtiss-Wright also disclosed that it is considering a proxy fight to replace Kennecott directors with others who would favor a Curtis-Wright policy of causing Kennecott to sell some or all of its assets and distribute the proceeds to shareholders. Curtiss-Wright also said it doesn't have immediate plans for a takeover offer but didn't rule out such a course in the future.
Combined Communications, based in Phoenix, said only that "recently disclosed conversations with a larger company relating to a possible combination of the two have been terminated."
When Combined made its initial announcement earlier this month, industry sources said talks had been started with Coca-Cola Bottling Co. of New York, which recently began a broadcasting subsidiary. Yesterday, following Combined's announcement, the company's stock rice plummeted.
After an initial trading halt, Combined opened at $33.75 a share, down $7.125 from last Friday. The stock closed at $34.25.
The Kaiser deal, which includes $4 million in inventories, was Kaiser Cement's largest in a series of gypsum sales over the last 2 1/2 years. Purchases of its gypsum operations have totaled more than $52 million over the period, Kaiser said.
Kaiser, the West's largest cement producer, said its plans to get out of the gypsum business will allow it to concentrate its resources on cement operations "which have shown consistent earnings growth in recent years."
The latest sale is scheduled for closing April 3. The transaction will mean an aftertax gain to the company of about $7.8 million or $1.24 per common share of stock, Kaiser said.