Continuing discussions with HSBC Holdings have strengthened your Board's belief in the potential for enhanced earnings from this combination. We have together identified a wide range of markets, products and services where benefits can be achieved, either through improved growth prospects, sharing best practices or through the elimination of overlap. Further details of some of the expected benefits are set out in the letter from the chairman of HSBC Holdings on pages 7 and 8.
Sale of Thomas Cook
It was announced on 4 June 1992 that Midland had agreed terms for the sale of the Thomas Cook Group Limited and Thomas Cook Inc. for £200 million, together with a pro rata proportion of the forecast 1992 earnings of Thomas Cook up to the date of completion. This transaction, which is expected to be completed during October 1992, is consistent with the Board's stated strategy of concentrating on Midland's core banking businesses. The disposal will result in an extraordinary gain estimated at £99 million and a benefit to Midland's distributable reserves estimated at £128 million.
Action to be taken
Your attention is drawn to paragraph 11 of Schroders' letter, on pages 15 to 17, which sets out the procedure for acceptance of the Final Offer in respect of your Midland shares. You should note that the closing date of the Final Offer is 1.00 p.m. on 25 June 1992. The Final Offer will not be extended beyond that time unless it has by then become unconditional as to acceptances. When considering what action to take, you are recommended to seek your own personal financial advice from your independent financial adviser.
Recommendation
The Board believes that the Final Offer constitutes an exceptional opportunity for Midland shareholders in terms of both earnings potential and asset backing.
The Board is advised by S.G. Warburg & Co. Ltd. and Samuel Montagu & Co. Limited, both of which consider the terms of the Final Offer to be fair and reasonable. As a consequence of Rule 3 of the City Code on Takeovers and Mergers, however, Samuel Montagu & Co. Limited is not in a position to give a recommendation in respect of the Final Offer in view of its membership of the Midland group. The directors of Midland (other than Mr William Purves and Mr Bernard Asher, who are respectively the chairman and a director of HSBC Holdings), who have been so advised by S.G. Warburg & Co. Ltd., consider the terms of the Final Offer to be fair and reasonable and unanimously recommend Midland shareholders to accept the Final Offer. The directors have lodged acceptances in respect of their own beneficial holdings.
sincerely, leher Walken
Sir Peter Walters Chairman
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