Standard Chartered's Acquisition of American Express Bank (B)

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Case Details:

Case Code : BSTR350
Case Length : 12 Pages
Period : 2007-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : Standard Chartered Bank / American Express Bank
Industry : Banking / Financial Services
Countries : UK, USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

StanChart Private Bank (SCPB) was a part of StanChart Consumer Banking division. It served clients with investable assets of over US$ 1 million (Refer to Figure I for Organization Structure of StanChart). With 150 years of presence in Asia, StanChart derived most of its profits from Asia.

It had set up the headquarters of its Private Bank in Singapore. Focus on emerging markets, good risk management and liquidity management practices helped StanChart face the global economic slowdown more efficiently as compared to its competitors who had a significant presence in developed countries which were reeling under recession.

StanChart started its private banking initiative on an aggressive note by launching SCPB in 11 locations within five weeks starting June 2007 which was exceptional in private banking industry.

Within a few months of starting its operations, StanChart announced that it would acquire American Express Bank (AEB) from American Express Company (AmEx) by paying US$ 300 million plus net asset value of AEB at the completion of the acquisition.

As a part of the deal, AmEx and StanChart also entered into a put/call option arrangement under which AMEX could sell and StanChart could buy American Express International Deposit Company (AEIDC)4 after 18 months of completion of the AEB acquisition. The price StanChart would need to pay AmEx for acquiring AEDIC would be the net asset value of AEDIC at the time of exercising the option...

 Excerpts >>

4] AEIDC is based in Cayman Islands. It issued short term, fixed rate deposit certificates to the customers of AEB.

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