Bank of Bermuda shareholders could have made quite a bit less ? $40 per share instead of $45 ? if an initially agreed price had stood.

In proxy materials sent out to shareholders yesterday, the bank revealed that it could have been acquired for approximately $1.15 billion instead of the final $1.3 billion price it fetched.

The sale was announced at the end of October, but is still subject to shareholder and regulatory approval.

In giving background information on the two parties' dealings the bank said: "At an early point in the negotiations (which were said to begin early this year), HSBC informed the bank that the consideration (price paid for the bank) would need to be entirely in cash and that approximately $5 of the special consideration should be paid in the form of a special dividend (from the bank's surplus capital)."

The bank continued: "These discussions had advanced to essentially definitive terms pursuant to which the bank would have been acquired for $40 per share, consisting of $35 in cash plus a $5 special dividend."

But before the deal could be agreed between the two parties, the Minister of Finance, Eugene Cox, had to be consulted and Government subsequently said it needed more to time to study the transaction.

Discussions between the bank and Government followed through the summer and it was not until mid-October that Government gave its blessing to the proposed sale.

In the interim however the bank had seen improvement in the performance of its shares on the Nasdaq and Bermuda Stock Exchange.

"In the second half of October, discussions were held with HSBC in which the bank put forth its position that the bank's improving results since June justified a greater price than previously negotiated.

"HSBC agreed that the total consideration should be increased to $45 per bank share and on 27 October, 2003 the board approved the various agreements with HSBC (at $45 per share)."

Also revealed in the proxy information was details of a fairness opinion commissioned by the bank which based on numerous valuations ? advisor Merrill Lynch said it had assessed $45 per share as a fair price for the bank based on valuations in a broad range of areas, from the bank's past market performance to historical results and future estimates of earnings, in comparison to a wide-range of other financial institutions ? that found that the bank was going for a fair price.

Each of Merrill's valuations resulted in their giving an imputed, or implied, on average value for the bank's shares, given different scenarios, from $45.41 to $48.92, $37.62 to $41.14, and 438.86 to $42.97.

In all but one case, this meant the bank's $45 price was higher than the average value range based on various financial indicators, when weighed against the values that had been achieved by peers recently acquired.

When asked if the price achieved was slightly better than fair, based on the numbers given in Merrill Lynch's fairness opinion, Mr. Smith said: "Their analysis simply indicates that it is fair. As you can see they did several different types of analysis and they compared us against different groups of banks to make sure they got the best fit they could find. We are a bit unique in the marketplace. We do compare to the peer group of trust banks, as you see here, but also compare in some respects to commercial retail banks.

"Basically they looked at all the possible comparisons and some of them are lower than the $45 price and I guess one of them is higher.

"We felt pretty good about the $45 price when we negotiated it. And when they, based on their research, opined that it was fair then we felt better."