The announcement that the Island?s largest bank could be sold off to a foreign bank hit many locals between the eyes.

Many initially did not know what to make of the news, as something like this had never before happened in Bermuda. It also raised all sorts of questions and concerns about what this could mean for the bank and the Island.

Although rumours about the sale of the Bank of Bermuda to multinational giant HSBC had been circulating since the summer months, the official announcement of the proposed sale at the end of October caught many off guard.

After the shock wore off, there was anger from some parties with disgruntled shareholders saying the $1.3 billion payout ? breaking down to $45 per share ? was not high enough, while bank employees began to fear for their jobs when it was said that there could be 250 redundancies made. For some, fear turned to hostility when it was announced that 150 of the job cuts would earn the top five executives a whopping $11 million plus bonus package in the year after the sale.

News of the possible sale had been leaked to prior to the Island?s July 24 General Election by PLP backbencher and union boss Derrick Burgess who said the bank had been in talks with Cabinet on the deal. The rumours were neither confirmed nor denied by the bank or HSBC.

It was later revealed by the bank, that not only had serious negotiations been underway since February, it had also been approached by HSBC some time before. In an interview with CEO Henry Smith said the banking giant had previously shown interest in the bank even before it listed on the Nasdaq in April, 2002, but that first discussion came to nought. An HSBC executive, Clive Bannister, also said in an interview with Dow Jones recently that the deal had been much longer, four years to be exact, in the making. That statement was later shot down by both the bank and HSBC, in an adamant refute of there having been any earlier discussion. The proposed sale was officially announced on 28 October, 2003 at a joint press conference of HSBC and Bank of Bermuda executives.

Under the terms of the agreement, the Bermuda operation will retain the Bank of Bermuda name for at least five years. It will however be immediately re-branded with the HSBC hexagon logo. The bank?s global operations are to be merged into HSBC offices and will no longer be known as the Bank of Bermuda.

Broken down, the $1.3 billion price, or $45 per share, was said to represent a 16. 3 percent premium over the bank?s average closing price on the Nasdaq during the previous three months. The price gives HSBC title to all of the bank?s holding of 251,000 square feet of Bermuda property.

The bank said it had gone up on the sales block, after 114 years of going it alone, because of its having ?struggled? in recent years as it faced growing competition from leaner global rivals, as well as the challenges of operating in an environment of poor interest rates. Management also cited Government?s declared interest in opening up the financial services sector to foreign institutions as bearing on their decision to sell out. As part of the sale, management predicted the 250 job cuts in its Bermuda operations, although it said some of those could be achieved through natural attrition.

Although both will be replaced, the first to be named as losing their jobs were CFO Edward Gomez and CEO Henry Smith. Mr. Gomez?s job will reportedly go to an HSBC appointed chief financial officer while Mr. Smith is to leave the bank within a year of the sale. It was announced that he will be replaced by Philip Butterfield who currently holds the number two spot as chief operations officer.

So far, the sale has the full backing of the bank?s management and board, and the blessing of Government. To go through however, it still requires the approval of the Bermuda Monetary Authority and the favour of a minimum number of shareholders . The bank?s sale was also given an overwhelming vote of confidence by the Island?s business community, who were able to meet with and question HSBC chairman Sir John Bond about the deal during his visit to the Island last month. Business leaders and investment managers have gone one step further than endorsing the sale, they also said for the sale to not go through could be disastrous both for the bank and the Island. They said there would be a loss of confidence in management?s ability to chart a course forward, the share price could plummet as investors reacted, and it could put a black mark on the Island?s reputation as an international business sector, sending ?a terrible message in terms of our business acumen?.

The prudential review by the Bermuda Monetary Authority was said yesterday to be in the final stages, and HSBC should be notified of its decision in the coming days.

The Bank of Bermuda said it would advise the public once regulatory consent had been obtained, but that may not be before the shareholder vote on Monday. Shareholders of record as of November 24 are eligible to vote for or against the bank?s sale to HSBC on Monday. And a one-third quorum of voters must cast their ballots, and of those, a minimum of 75 percent must vote in favour for the sale to close.

Although the price for the bank drew fire from some bank investors as being too low, some Bermuda investment managers said the bank?s inefficiency and poor return on assets and equity in recent years made the bank?s price tag a good deal for HSBC and investors.

In the run up to the shareholder vote, proxy information was released by the bank to shareholders. It revealed details of a fairness opinion on the sales price for the bank by leading investment firm Merrill Lynch. It is also reported that Merrill stood to make some $10.8 million and costs if the sale goes through. It is only to be paid $600,000 if shareholders vote down the take-over.

Proxy materials also showed that five of the bank?s senior management could profit handsomely if they cut 150 jobs in the first year and retained 70 percent of those employees that HSBC and the bank specified as ?key? to the operation.

Those to be paid the bonus, for achieving the set targets, are CEO Henry Smith, COO Philip Butterfield, head of private client services Wayne Chapman, head of banking services Michael Collins and head of the bank?s fund administration arm, Global Fund Services, Paul Smith. Together they could be due $6.6 million in cash and a further $4.7 million in HSBC shares that would vest in three years.

It was reported that Mr. Smith?s bonus payment was not tied to the targets, and he is to be paid the millions when he leaves the bank. Millions of dollars may also be made by senior management off options that will become fully vested if the sale goes through.

Proxy information reported that a significant number of Bank of Bermuda stock options are held by board members and senior executives. The shares that directors and senior management held, as of the record date for the HSBC vote, which was 24 November, was greater than 2.5 million. Those options, with 112,552 held by directors and some 2.4 million by senior management, are exercisable at an average price of $35.59 and $33.92 respectively.

Regardless of the disfavour the possible sale had curried with some stakeholders, some close to the organisation predicted that even those unhappy with the bank?s buy out could vote in favour of the deal, as a means of preserving the value of their investment.

A meeting of those opposed to the bank?s sale to HSBC is scheduled to take place tomorrow at 6 p.m. at the office of Dr. Paul Harlow at 129 Front Street. American investment veteran Walter Lipman is flying into Bermuda for the meeting and shareholder vote on Monday.