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Fri 4 Jun 2010 02:30 PM

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UK's HSBC in talks to sell private equity arms

Europe's biggest bank to also spin out its PE fund management businesses in Mideast.

UK's HSBC in talks to sell private equity arms
HSBC BUSINESSES: HSBC spun off its bigger European buyouts business in 2003. (Getty Images)

British bank HSBC is in talks that could lead to five separate management buyouts of its private equity fund management businesses, it said on Friday, as banks go back to focusing on core operations.

Europe's biggest bank said talks are expected to lead to spin-offs of its private equity fund management businesses in Hong Kong, Britain, the United States, Canada and the Middle East.

HSBC's regional private equity businesses manage $8.8 billion of assets and focus on supporting management buyouts in Britain, technology investments in Asia, mid-market private equity and mezzanine deals in the U.S. and management buyouts and providing capital for growing businesses in Africa.

HSBC intends to retain its investments of about 20 percent of the private equity businesses, a spokesman said.

HSBC spun off its bigger European buyouts business in 2003, retaining a minority stake in the firm which subsequently became Montagu Private Equity.

Tougher regulation of the banking industry is leading banks to pare back non core activities, such as private equity investing, to focus on core businesses.

The announcement from HSBC follows plans from Barclays to spin off its mid-market buyouts arm this summer ahead of a planned fundraising by the private equity business later in the year. Royal Bank of Scotland is also in talks to sell its European and U.S. private equity funds portfolios.

In a separate statement, independently listed vehicle HSBC Infrastructure said the bank had agreed terms to spin off HSBC Specialist Investments, the British private equity division, which is one of the five management buyouts currently being sold, and which advises it on investments.

The deal is expected to be completed by the end of 2010 and will see HSBC retain a substantial minority stake in the business.

HSBC Infrastructure said it is in discussions to ensure that its operational relationship with HSBC Specialist Investments continues. It said it had been reassured that steps are being taken to secure the necessary consents and regulatory approvals. (Reuters)

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