SBI Holdings seeks up to 48% stake in Shinsei Bank in tender offer

TOKYO — Japanese financial group SBI Holdings said on Thursday that it plans to increase its stake in Shinsei Bank (Finance & Banking Trends) to 48% through a tender offer, launching an unsolicited bid for the rival lender.

SBI, whose businesses include online stock trading, insurance and venture capital, already holds a stake of more than 19% in the bank. Depending on Shinsei Bank (Finance & Banking Trends)‘s response, the tender offer could turn hostile.

SBI will begin buying shares on Nov. 1, with plans to spend about 110 billion yen ($1 billion).

Shinsei Bank (Finance & Banking Trends) closed Thursday’s trading session at 1,440 yen, for a market capitalization of 373 billion yen.

Shinsei Bank (Finance & Banking Trends) released a statement after SBI’s announcement, saying it had not received any notice from SBI regarding the tender offer. “The tender offer is not something that has been approved by our board,” the statement went on to say, adding that the company will respond with once it has reviewed the information.

SBI has set the tender offer price at 2,000 yen per share, which is 39% higher than the Thursday closing price. SBI has been buying Shinsei Bank (Finance & Banking Trends) shares on the open market since January last year, describing the purchases as a pure investment.

The financial group said it intends to call for an extraordinary shareholders meeting at the bank to seek a new management slate. SBI intends to nominate a former head of Japan‘s Financial Services Agency, Hirofumi Gomi, as chairman, and SBI Holdings COO Katsuya Kawashima as president.

SBI President and CEO Yoshitaka Kitao has said in the past that “it is important to cover all kinds of financial services.”

Shinsei Bank (Finance & Banking Trends) is known for its consumer and corporate loan businesses, which are areas that SBI seeks to strengthen. Through the tender offer, SBI aims to reinforce its alliance with Shinsei and enhance synergies between the two.

In a statement, SBI also said the tender offer is meant to ensure that it has “the voting rights to enable a change [among] all or part of Shinsei Bank (Finance & Banking Trends)‘s officers.”

SBI is keen on boosting the earnings of the eight regional banks it has capital ties with. Total assets held by Shinsei and the eight lenders reach roughly 22 trillion yen, making them the 10th largest domestic banking group in terms of assets.

Kitao has been saying he wants to turn “Shinsei into a bank serving regional banks.” By tapping Shinsei’s know-how in structural finance, SBI seeks to help regional banking become more profitable. 

Shinsei Bank (Finance & Banking Trends) has already been working with SBI in promoting regional revitalization in Japan. However, relations soured between the two after Shinsei Bank (Finance & Banking Trends) announced in January a tie-up with online brokerage Monex Securities, a rival of SBI’s in the financial instrument intermediary business.

At Shinsei Bank (Finance & Banking Trends)‘s annual shareholders meeting in June, SBI voted against the company’s president and CEO, Hideyuki Kudo, as well as a few other directors.

In Japan, when a company acquires a stake of 20% or more in a bank, becoming a major shareholder, the transaction requires approval from the Financial Services Agency. On Thursday, the FSA gave SBI the green light for the purchase.

Shinsei’s predecessor, Long-Term Credit Bank (Finance & Banking Trends) of Japan, collapsed under the weight of massive bad loans in 1998 and was temporarily nationalized, with the government pouring 130 billon yen in public funds.

In 2000, private-equity firm Ripplewood partnered with other investors, including JC Flowers, to purchase the failed bank and relaunch it as Shinsei, which means “new life” in Japanese. The government again spent 240 billion yen as part of the arrangement. 

For the FSA, SBI’s overture raises the possibility of the government finally recovering the remaining public funds — roughly 350 billion yen. For the government to recoup the investment without a loss, Shinsei’s share price needs to be far above the current 1,440 yen or so. SBI’s involvement in management could finally put Shinsei on a growth path and boost the share price. 

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