Bank of Bermuda chief executive officer Henry Smith told The Royal Gazette this week that negotiations with HSBC were so top secret that he couldn't tell his wife and a family vacation was even cut short.

“All of this stuff was going on and she didn't know,” Mr. Smith said candidly in an interview. “It was very frustrating.”

For the first time, Mr. Smith shared behind-the-scenes details of HSBC's $1.3 billion acquisition of the Bank of Bermuda.

“One of the frustrations was, we - and there I mean the board and executive officers - couldn't tell our wives what was going on. I could not tell my wife, I was going to London, to New York.

“Some of the meetings were in London (where HSBC is headquartered for its network of banks spanning 79 countries) and others in New York and very few were in Bermuda. Those (on the Island) were near the end (of the negotiation). And most meeting were held on what I would call neutral ground, we would meet in a hotel.”

But Mr. Smith said that there still hasn't been a big celebratory night out. “We haven't had one yet but I guess we will. I never count my chickens before they are hatched so I don't believe in celebrating something you have not achieved.”

Did he find it intimidating to negotiate the sale to multinational banking giant HSBC?

The veteran of the bank, who worked his way up from the post of teller 30 years ago to CEO for the last seven years , said it was daunting initially, but that soon passed.

The announcement that the bank, Bermuda's biggest, was being bought out by HSBC came late last month, and following months of speculation that the bank was being targeted for acquisition.

Mr. Smith said that negotiations started in February and that HSBC was the one to express interest first.

“It was a little intimidating I guess but we went into that process with advisors in place. When we did our listing (on the Nasdaq, which took place in April, 2002), Merrill Lynch was advising us and has for a long time. When we were approached by HSBC we immediately got Merrill on board.

“So it was a little intimidating, but you get over that quickly. At the end of the day, you either do a deal or you don't. They did not have any leverage us, they could not force it to happen. If we did not like the deal, we would have said no. And even today if someone came along with a better offer, we would have to consider it.”

Mr. Smith added: “Dealing with HSBC was not a real problem. We did have to negotiate; they were tough, and they do not like paying $45 I can tell you, but Mr. Smith, 54, said: “But we were not negotiating without tools, keep in mind none of us is a babe in the woods.”

He said that negotiations took place between the bank's top three senior managers - himself, chief operating officer Philip Butterfield and chief financial officer Ed Gomez - with the heads of certain business units at HSBC. He said on the HSBC side, they were dealing with people who report to chairman Sir John Bond. Although both sides were liasing with their own advisors - for the Bank of Bermuda that being Merrill Lynch - they were not at the forefront of negotiations.

Sir John, the formidable head of HSBC, has yet to play a direct role in the $1.3 billion acquisition of the bank. Mr. Smith has met Sir John but said that dated back to before the sale, although he said he expects he may come to the Island once the deal is closed.

“I know Sir John. I attend a number of forums as head of this bank that he attends as head of his bank. And I first met him years ago. I wouldn't say that I know him terribly well but we certainly know who the other his and we have had discussions at various meetings.”

So how does a billion dollar deal take shape? Mr. Smith said it was very business like and since the deal is still awaiting shareholder and regulatory approval, there have been no lavish celebrations.

He said: “When the board agreed to recommend it (the deal) to shareholders, we then signed an agreement with HSBC to pursue the transaction. At the signing, I signed and shook hands with Iain Stewart (general manager of group operations for HSBC) who signed on their behalf. But when the transaction goes through, it will be at a higher level.”

“If the shareholders approve the transaction (a meeting to vote on the deal is set to take place in the first quarter of 2004) then there will be a closing ceremony and I assume we'll have Sir John Bond and our chairman, Joe Johnson, there and that would take place in Bermuda.”

When asked if negotiations were in a social or business setting, Mr. Smith said: “As a general rule, we raise ideas with clients in social settings like dinners, golf, what have you, but we actually do the business in a business environment. That is true with clients and it is certainly true with something like this. None of our meetings were social at all.”

Mr. Smith said he isn't taking anything for granted until shareholders vote on the deal.

“Even If you add up all of the votes of the Bank of Bermuda Foundation (the bank's largest shareholder with 11 percent of the bank's shares), the board, and management and so forth, you are still a long way from getting the votes that you would need. Nothing is going to happen until shareholders have the proxy information (which is scheduled to be sent out in the next few weeks and will include Merrill Lynch's fairness opinion on the price of the deal) and get a chance to vote,” he said.

Mr. Smith concluded that nothing was certain until those who own the bank, its shareholders, have their say on whether or not the bank should be sold.