Goldman Sachs Defends a Global Bank From Hostile Takeover Bid

In 1986, Goldman Sachs advises Standard Chartered Bank when it is the target of a hostile bid from Lloyds Bank.

In 1986, Lloyds Bank was the fourth-largest clearing bank in Great Britain. With a strong base in European and Latin American markets, that year Lloyds sought to extend its global reach by acquiring Standard Chartered Bank, which had a presence in 60 countries across Africa, Asia and North America. In 1979, Standard Chartered had purchased the sixth-largest bank in California, Los-Angeles-based Union Bank. A combination with Standard Chartered would have made Lloyds the biggest bank in Britain and the world’s tenth-largest bank.

Standard Chartered disapproved the bid immediately, stating it was “strongly opposed” to Lloyds’ formal offer of GBP1.167 billion (US$1.7 billion). At the time of the offer, Goldman Sachs was working with Standard Chartered to assess the value of some of its holdings, including Union Bank. The firm also advised Standard Chartered on the US regulatory procedures surrounding the Lloyds bid. Given Standard Chartered’s ownership of Union Bank, the Federal Reserve Board would also need to authorize any change in ownership, a process that was unlikely to happen within the time frame necessary for the bid to be approved by the UK Takeover Code.

As a second line of defense against Lloyds’ hostile bid, Goldman Sachs and (now-defunct) Yamaichi Securities advised Standard Chartered to pursue a listing of some of its existing shares on the Tokyo Stock Exchange, where the shares were priced much higher than on the London International Stock Exchange, with the goal of making a takeover more expensive for Lloyds.

Ultimately, Lloyds’ offer was thwarted when three “white knight” investors came in and assumed control of 27 percent of Standard Chartered’s shares for more than GBP330 million (US$497.81 million).

Assisting with Standard Chartered’s raid defense was the beginning of a lasting relationship between the bank and Goldman Sachs. Among other global transactions, Goldman Sachs would go on to advise Standard Chartered on the sale of Union Bank in 1988 and its US$823 million acquisition of American Express Bank, completed in 2008. The firm would also underwrite new share issuances in multiple years and act as one of the managers for Standard Chartered’s first-ever listing of Indian Depositary Receipts in 2010.

 

This article was originally published as part of a series commemorating the 150th anniversary of Goldman Sachs’ founding in 1869.