2.
The Final Offer
3.
On behalf of HSBC Holdings, we hereby offer to acquire, on the terms and subject to the conditions set out or referred to in this document and in the Form of Acceptance, all or any of the Midland shares, other than the Midland shares already owned by the HSBC Holdings group, on the following basis:
For every 100 Midland shares
120 new HSBC Holdings shares and £65 nominal of new HSBC Holdings bonds
and so in proportion for any other number of Midland shares held.
The procedure for acceptance of the Final Offer is set out in paragraph 11 of this letter. Acceptances of the Final Offer should be received by not later than 1.00 p.m. on 25 June 1992. Full acceptance of the Final Offer (assuming full exercise of outstanding options under the Midland share option schemes) would result in the issue of approximately 827 million new HSBC Holdings shares, representing approximately 34 per cent. of the enlarged issued ordinary share capital of HSBC Holdings, and approximately £448 million nominal of new HSBC Holdings bonds.
In advance of dealings in the new HSBC Holdings shares commencing on the London Stock Exchange and the Hong Kong Stock Exchange, Schroders, financial advisers to HSBC Holdings, and Cazenove & Co., brokers to Midland, are of the opinion that a reasonable estimate of the value of the new HSBC Holdings shares, if they were listed, would be approximately equal to the market value of the existing HSBC Holdings shares. Schroders and Cazenove & Co. are also of the opinion that, on 8 June 1992 (the latest practicable date prior to the printing of this document), a reasonable estimate of the value of the new HSBC Holdings bonds, if they were listed, would have been at least par.
The financial effects of accepting the Final Offer are set out in paragraph 6 below.
Your attention is drawn to paragraph 7 of this letter and to the conditions and further terms of the Final Offer set out or referred to in Appendix I to this document and in the Form of Acceptance.
The Cash Election
Midland shareholders who accept the Final Offer may, as an alternative, irrevocably elect to receive cash instead of all but not part only of the new HSBC Holdings bonds to which they would otherwise be entitled on acceptance of the Final Offer on the basis of £1 in cash, free of all expenses, for every £1 nominal of such new HSBC Holdings bonds. Midland shareholders who validly make the Cash Election will receive:
For every 100 Midland shares
120 new HSBC Holdings shares and £65 in cash
and so in proportion for any other number of Midland shares held.
The procedure to elect for the Cash Election is set out in paragraph 11 of this letter. Elections for the Cash Election should be received by not later than 1.00 p.m. on 25 June 1992.
Full acceptance of the Cash Election (assuming full exercise of all share options) would result in the payment of approximately £448 million in cash, which is being provided by way of the underwriting of the new HSBC Holdings bonds referred to below.
The financial effects of electing for the Cash Election are set out in paragraph 6 below.
The Cash Election is conditional on the Final Offer becoming or being declared unconditional in all respects. The Cash Election will remain open for acceptance until 1.00 p.m. on 25 June 1992 and, if the Final Offer has by or on that date become or been declared unconditional as to acceptances, will remain open for acceptance until 1.00 p.m. on the day being 14 days thereafter, at which time it will close.
By a Subscription Agreement dated 2 June 1992, Credit Suisse First Boston Limited, Schroders, Cazenove & Co. and S.G. Warburg Securities have jointly and severally agreed with HSBC Holdings, subject to the Final Offer becoming or being declared unconditional in all respects, to subscribe or procure subscribers for such nominal amount of new HSBC Holdings bonds as is equal to the nominal amount of such bonds not issued to, and thereby made available as the result of, accepting Midland shareholders validly making Cash Elections (subject to a maximum nominal amount of £454,168,067) at a price of 100 per cent. of their nominal
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