Fear drove Household International's decision to sell out to HSBC last month. Executives and advisers on both sides have done a good job of presenting the roughly $14 billion deal as an ideal strategic fit for both the US consumer finance company and the UK banking group. And so it may prove to be, although as a first step executives need to sweep away the rumours swirling around at the end of November that the deal was in danger of collapsing.
But a deal struck at roughly 1.6 times Household's book value smacks more of desperation than strategy. Household CEO Bill Aldinger now says that it was always his intention at some point to link up with a deposit-taking institution. This was not the preferred timing, though.
The company's stock price closed at $22.45 the night before the deal was announced, more than $40 lower than its high for the year of $63.25 hit during the day on April 22.
Other independent finance companies - big issuers in the bond markets - had provided their own shocks to the market in recent months. Credit-card company Providian went bankrupt at the end of 2001, as did online peer Nextcard.