Hsbc And Merrill: Why Not A Wedding?
When Britain's HSBC Holdings PLC and Merrill Lynch & Co. unveiled a $1 billion joint venture to create a global online financial service on Apr. 18, some analysts were quick to speculate about a possible full-scale merger. After all, rumors have been rife lately that Merrill was the bid target of choice for a big European bank, such as Germany's Deutsche Bank.
So it's no surprise that both HSBC Chairman Sir John R.H. Bond and Merrill Chairman and CEO David Komansky quickly insisted that they have no merger in mind. HSBC and Merrill are a near perfect fit. For example, HSBC has strong retail operations all over Asia--except Japan, where Merrill is well established. And HSBC has plenty of cash. So, if Komansky ever needs a friendly white knight, he has one almost in-house.
The venture, named Merrill HSBC for now, will offer a broad range of services to clients with $100,000 or more to invest. It will operate in 21 countries outside the U.S., starting in Britain this fall. The potential is huge: HSBC figures it could pick up 50 million customers within a decade. "The new company was formed to take advantage of a whole new market," says James P. Gorman, Merrill's chief marketing officer.
All the same, some observers wonder whether Bond has given away too much. "It's surprising that HSBC, the world's second-largest bank, felt compelled to do this with another company," says Peter Toeman, a Morgan Stanley Dean Witter banking analyst in London. HSBC will get into the online market quicker than by going it alone. But Merrill gets access to half of HSBC's wealthy international clients.
For Bond, the deal furthers his ambitions to create a lucrative global asset management business. But even that doesn't preclude a full merger.