Shinsei Bank and Aozora Bank, both partly owned by US private equity firms, are in talks over a merger that would create one of Japan’s largest banking groups, with assets of around 18,000 billion yen (USD187.7 billion), according to the Financial Times.
Shinsei, 32.5% of which is owned by JC Flowers & Co, reportedly confirmed the discussions with Aozora, which is 50.5% owned by Cerberus Capital Management.
Both banks have suffered heavy losses during the global financial crisis. Shinsei’s net loss in the last financial year stood at 142 billion yen (USD1.5 billion), while Aozora’s was 242.6 billion yen (USD2.5 billion), mostly put down to troubled foreign investments.
A source told the FT that talks between the two banks were likely to be complicated, as several large shareholders were involved.
JC Flowers, which paid 425 yen (USD4.43) per share for its stake in Shinsei in 2007, is said to be sitting on a big loss from the investment. Aozora’s share price has also apparently dropped dramatically from the 325 yen (USD3.38) each Cerberus paid for shares in 2008.
The Japanese government, which has stakes in the two banks, is said to be restricted to selling its Shinsei shares only when they reach a price of 745 yen (USD7.77) each.
JC Flowers led a group of investors which acquired Shinsei in a USD1.2 billion transaction and completed a turnaround of the business, resulting in an IPO in 2004. The firm never fully exited its investment, holding on to a small stake, which the firm increased in 2007.
Cerberus acquired Aozora in 2003, taking the bank public in 2006.
D.C.