TNAG-2474-FCO40-3604-Business-matters-in-Hong-Kong-acquisition-of-Midland-Bank-by-1992 — Page 39

of shareholders; in the long term, this can only come from growth in revenue and the primary rationale of the merger is to facilitate that revenue growth.

In the Original Offer Document, I explained that we estimated the contribution to pre-tax profits resulting from the merger would exceed £800 million over the first four years and to be running at an annual rate in excess of £300 million in 1996. These estimates were based on a detailed examination of 14 business segments across the enlarged group by members of management of the two banks. Such estimates show that, in addition to benefiting from, for example, cross referral between regional businesses and from international trade flows, the enlarged group will benefit in areas such as:

Information Technology The enlarged group will benefit from increased efficiency achieved through the transfer of technology and economies of scale. Benefits in 1996, all of which arise from cost-savings, are estimated at £70 million.

Treasury - The enlarged group will benefit from increased revenues arising from the extended product range and customer base as well as from cost-savings arising from integrating operations and lower funding costs. Benefits in 1996 are estimated at some £65 million, of which approximately 80 per cent. will represent increased revenue.

I am pleased to confirm that we have now received all the major regulatory consents we require to complete the merger. In addition, HSBC Holdings' shareholders have also approved the Final Offer. Our offer is now final and will not be increased in any circumstances; it is open for your acceptance until 1.00 p.m. on 25 June 1992.

We believe that our Final Offer is full and fair and that the opportunities open to the enlarged group are excellent. I urge you to accept our Final Offer and I look forward to welcoming you as a shareholder in the enlarged group.

Yours sincerely,

qu

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