Industrial and Commercial Bank Asia and Fortis Bank Asia HK signed a sale and purchase agreement on 31 December forming Hong Kong's sixth largest bank.

ICBC Asia agreed to acquire the entire issued capital of Fortis Bank's Hong Kong retail and commercial banking operations for a total consideration of HK$2.16bn (US$278m).

Although the acquisition still has to undergo regulatory approval, it is expected to complete by 30 April. The proposed acquisition was first announced in August 2003.

Hong Kong partner Teresa Ko led the Freshfields Bruckhaus Deringer team advising seller Fortis, assisted by banking partner Nic Johnston. Herbert Smith acted for ICBC Asia.

Ko said: "This prominent transaction not only provides more impetus for consolidation in Hong Kong's banking sector, but also makes a bold statement on the potential of strategic stakes in PRC-owned banks in Hong Kong."

The acquisition amount will be satisfied through the issue of 81,752,000 new ICBC Asia shares worth approximately HK$612m (US$79m), representing 9% of its enlarged capital, with the balance of HK$1.55bn (US$200m) in cash.

Fortis will retain other areas of its banking businesses, namely global commodities, global corporate banking, institutional banking and funds and private banking.

Following the completion of the transaction, ICBC Asia will be ranked the sixth largest bank in Hong Kong, with assets reaching HK$95bn (US$12.2bn) - exceeding that of Wing Hang Bank's HK$85bn (US$10.9bn), which recently acquired the entire issued capital of Chekiang First Bank from Mizuho Corporate Bank.

Fortis Bank Asia HK has 22 branch offices in Hong Kong, while ICBC Asia has 20. The plan is for the systems of the two banks to be fully integrated with each other by end of this year.