HSBC Holdings Plc is planning to privatize its Hong Kong subsidiary, Hang Seng Bank Ltd, in a bid to increase its investment in Hong Kong and better capitalize on the city’s position as a leading global financial hub.

Shares of Hang Seng Bank soared over 26 percent in morning trading following the announcement on Thursday.

HSBC proposed to offer HK$155 ($19.9) per share, valuing the transaction at around HK$106.1 billion. This offer seeks to purchase the 36.5 percent stake in Hang Seng Bank that HSBC does not own.  

READ MORE: HSBC asks Hang Seng Bank to clean up bad Hong Kong property debt

The proposed price represents a 30.3 percent premium over Hang Seng Bank’s closing price of HK$119 on Wednesday and exceeds the stock’s highest price in 3.5 years, HSBC said.

If the privatization is approved, Hang Seng Bank will become a wholly owned subsidiary of HSBC Asia-Pacific, and its more than 50-year listing on the Hong Kong Stock Exchange will be terminated.

“Our offer represents a significant investment into Hong Kong’s economy,” said Georges Elhedery, group CEO of HSBC.

“(This) underscores our confidence in this market and commitment to its future as a leading global financial center, and as a super-connector between international markets and the Chinese mainland,” he added.

ALSO READ: HSBC 'disbands team focused on managing geopolitical risks'

“The proposal … underlines our confidence in the growth potential for both HSBC Asia-Pacific and Hang Seng,” HSBC said in a statement, noting that this move would enable Hang Seng’s existing customers to gain greater access to HSBC’s global network and full product suite.

The Hong Kong Monetary Authority stated that it is aware of the privatization plans and has been communicating with the banks involved. HSBC and Hang Seng Bank will continue to operate as two separate “authorized institutions” after the privatization is completed, the authority said.

Contact the writer at irisli@chinadailyhk.com