Bank of Bermuda shareholders yesterday gave their “overwhelming approval” to the sale of the Island's largest bank to banking giant HSBC Plc.

A crowd of about 650 people, many of them senior citizens, packed into the Fairmont Hamilton Princess's Harbourview Ballroom at 2 p.m. to hear chairman Joseph Johnson and CEO Henry Smith speak one last time on the deal which was first announced last October, followed by comments from shareholders before casting their vote for or against the deal.

By 5.30 p.m. last night the bank announced the sale had been given the strong support of shareholders, with 91 percent of 83.8 percent of the bank's outstanding shares being voted in favour of the $1.3 billion deal.

The sale is to become effective tomorrow, and cheques will start to go out to shareholders - at $45 per share - at the end of the week. Shareholder approval of the sale had not been unexpected with widespread speculation in recent weeks that investors would ink the sale. And many on their way in to the meeting yesterday could be heard to say “it is a done deal” again and again.

One shareholder told The Royal Gazette that she knew her ‘no' vote would count for very little, and found the whole process off-putting. “They are asking our opinion, but why? They are going to do what they are going to do anyhow. I will vote no, but I really have no influence.”

But the woman next to her took the opposite view. “I am a small fish but the world is changing globally and I feel in order for us to keep up with that, this is the right decision.”

The deal, which was first announced at the end of last October, was also given regulatory approval by the Bermuda Monetary Authority early yesterday afternoon.

Although the BMA's prudential review took up to the eleventh hour, COO Philip Butterfield praised it for the “deliberate manner” in which it had gone about its business.

Meanwhile, Mr. Johnson said he was pleased by the result but did not deny that yesterday's decision was a big one for the Island. “There is obviously some emotion. It is a sad day in view of Bermuda tradition that we are going to amalgamate. It is a sign of the times; we have to look for new partners and avenues. “We are crossing a key milestone, but it is not an end but progress towards a new beginning.”

The bank previously announced that its sale to HSBC could result in up to 250 job cuts over the next three years, though management said some of the redundancies would be achieved through natural attrition.

Mr. Butterfield yesterday moved to reassure stakeholders that changes - including job cuts - at the bank would not happen with a “big bang, but in a slow and methodical way.

“We now begin the process of an orderly transition. All of the changes will take place gradually once we have agreed the master plan.”

HSBC chairman Sir John Bond, who was on the Island at the beginning of the month to meet with stakeholders, said: “We are delighted that the shareholders of Bank of Bermuda have approved the transaction. We believe this is in the best interests of the customers and shareholders of both companies. We have always had the greatest respect for Bank of Bermuda and we now look forward to working with our new colleagues on making the acquisition a success.”

Although only legal representatives from HSBC were present at yesterday's meeting, the bank said some HSBC executives would be on the Island for board meetings tomorrow.

Following the result last night chairman Joseph Johnson, flanked by CEO Henry Smith and COO Philip Butterfield, said he was very pleased with the result and the strong turnout. He said the turnout was “gratifying” and an indication that shareholders had given the sale great consideration, and after deliberation had “decided to effect the amalgamation with overwhelming approval.

“At the same time, I want to stress that the completion of this amalgamation will not mark an end in your relationship with us, but rather, a new beginning. You will all remain key stakeholders in the Bermudian community, and therefore in our bank. As such, your best interests will continue to be a priority for us. That's why your support does more than merely strengthen our confidence in this amalgamation. We also see your support as underscoring the obligation and commitment we have in continuing to work in the best interests of our customers, employees and the people of Bermuda,” he told shareholders, adding: “This is a responsibility that we do not take lightly. We will work to deliver on our commitments to you and the people of Bermuda.”

An independent consulting firm was hired by the bank to oversee the count of votes, which were contained in two ballot boxes. The tally was done under tight security and behind closed doors, with it taking about half an hour longer than expected.

Dialogue

During the meeting, shareholders were allowed five minutes each to make comments and ask questions. The comments were cited by executives as being thought provoking and generally positive. Michael Ashton said “a mourning process was required” following the bank's sale to HSBC and that “I have begun to feel a stranger in my own land, but we are citizens of the world” and that he saw this as “a path to the future”.

He said he was “not sure where HSBC will take us or treat us” but hoped people would not lose familiarity with the bank, and the bank with the people. Mr. Smith said the bank's focus would continue to be “the welfare of Bermudians” and that management and the majority of the board would remain in the hands of Bermudians.

Andrew Trimingham told the audience that his forefathers had founded the bank in 1889, and that this was an emotional event for him. But “if we do not move Bermuda further on to the world stage, it might fall off the world stage,” he said.

One shareholder, a former employee, said his ambivalence about the sale made him feel like he was attending “a funeral and a wedding”.

The sale was not welcomed by equal rights activist Eva Hodgson who said she was angry that Government had let it happen.

And American investor Walter Lipman, who has been a vocal opponent of the sale and was making his first trip to the Island to fight the deal, told the audience he did not buy management's argument that the bank had been struggling to compete against global competitors, and that HSBC would enable the bank to build on its 114-year history. His comments were reportedly given a rousing round of applause.

Mr. Lipman told The Royal Gazette there were sharks and there were pilot fish in the ocean, and pilot fish survive. And he said the bank was “a pilot fish of the highest order,” that would not have floundered in the water, but had been positioned to steer a clear and steady, but still independent course.

Former premier Sir John Swan, who said he had voted in favour of the sale, told the audience: “We must not confuse ourselves. This is not about if we get an extra $5, it is not about if we think the bank can or cannot work. What this is really about is making Bermuda work for future generations.”

Sir John added that change was not always necessary to do that, but he believed in this deal.

“This moment is good as we need to expand our base of income. We have become dependent on insurance and reinsurance, particularly with the demise of our tourism industry. To do that we need strategic partners. HSBC is one of those and we have also opened up channels for other companies,” he said of Government's stated intention to continue opening up the Island's financial services sector. He said he was in favour of that policy, if done with prudence, as it would help Bermuda's viability. Last evening, Mr. Smith told the media that there was only one thing he would have done differently if he was selling the bank all over again.

“I would have spent more time explaining this (sale) to our retired staff. This was more of an emotional investment for them than for other people.”

Some critics have said the bank botched the public relations around the sale, but Mr. Johnson shot that down. “The proof is in the pudding. Look at our large turnout,” he said, and noted that shareholders had been well-informed.

“There will always be critics, but we have done our job, “ he said. In the months since the sale was announced staff morale has reportedly suffered on the back of news that there would be “significant” job cuts in the deal, and that the top senior executives could collectively cash in on more than $11 million in bonus payments and investments if they cut 150 jobs in the first year, while retaining 70 percent of key staff. But yesterday Mr. Smith said the bank was working with staff to move them into other jobs, where possible, and when cuts were made to do so “fairly and generously”.

He described morale amongst employees as good: “We do not sense tremendous anxiety around the bank.”

Mr. Johnson added: “Everything starts at the top. The board and management are unanimously behind this, and staff are starting to pull together for this transition.”

Bank management said it would be business as usual, at the bank this morning. There was no word from the bank yesterday on when its shares would stop trading on the New York Stock Exchange, with it having previously announced that the sale would mean it delisting.

And executives said there would be no big celebratory dinner last night. with senior management saying they just wanted to catch up on their sleep.

Mr. Johnson, who is an AIG executive, with a smile, said: “This has been a long week; I have a day job you know.”