Mixed messages from Argentina
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Mixed messages from Argentina

Does Banco Galicia’s acquisition of HSBC Argentina validate president Javier Milei or weaken him?

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In mid March, when the market rumours that Banco Galicia was planning to buy HSBC Argentina became deafening, I called some senior bankers in Buenos Aires. They focused on the swift revival of Argentine banks’ M&A appetite under new president Javier Milei. The locals told me they thought that Galicia’s strategy made sense – adding scale to one of the country’s biggest banks – but that it was the timing that was the interesting variable: the swiftness of this risk-on signal was validation of a renewed confidence in the new administration.

On Tuesday April 9, Galicia announced the deal had been struck – it had an agreement to purchase HSBC Argentina for $550 million. The final transaction value will be adjusted for the results of the business and fair value gains/losses on HSBC Argentina's securities between December of 2023 and the closing of the deal.

Banco Galicia will pay $275 million in cash and Grupo Galicia will issue $200 million in B shares to HSBC. Citi reckons that, using February's data, the operation implies a roughly 0.3x price to book value multiple for HSBC Argentina's $1.4 billion equity.

Additionally, Galicia will acquire HSBC Argentina's private debt for $75 million in B shares.


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