Banks' merger talks collapse
By Tomoko A. Hosaka |
May 15, 2010, Saturday
|
Print Edition
Print Edition
A planned merger between Shinsei Bank Ltd and Aozora Bank Ltd - two midsize Japanese lenders with major United States shareholders - collapsed yesterday amid differences over business strategy.
The two banks said that they had parted ways after 10 months of unsuccessful negotiations. The announcement was widely expected.
Their separate statements brought an end to what began last summer as a way for two money-losing banks to survive the financial crisis and boost competitiveness through scale. A merger would have created Japan's sixth-largest bank.
Since then, Aozora has recovered while Shinsei continued to struggle.
Aozora swung back to black last fiscal year, with a net profit of 8.3 billion yen (US$89.8 million) after a 242.6 billion yen loss the previous year. Its capitalization is among the best in the country, with its Tier 1 ratio at 15.2 percent. The higher the ratio, the more stable a bank is generally considered to be.
Meanwhile, Shinsei posted a net loss of 140.1 billion yen, staying in the red for a second straight year. Its Tier 1 capital ratio stood around 6.4 percent.
A group of investors, including affiliates of US private equity firm JC Flowers & Co, owns 32.5 percent in Shinsei. Cerberus Capital Management LP, also of the US, owns 55 percent of Aozora shares.
Merger talks derailed when the two sides could not agree on integration issues and how the combined entity would pursue future growth. The gap in their capital health also proved fatal to the deal.
Aozora President Brian Prince told reporters that Shinsei's core capital was not sufficient, according to the Nikkei financial daily.
Instead, the two lenders said they would pursue independent paths but are considering establishing a business alliance.
"We canceled the merger plan, but intend to cooperate in areas we can," said Shinsei President Masamoto Yashiro, according to Kyodo news agency.
Along with its disappointing earnings report, Shinsei announced an overhaul of its executive team and a new business model.
The two banks said that they had parted ways after 10 months of unsuccessful negotiations. The announcement was widely expected.
Their separate statements brought an end to what began last summer as a way for two money-losing banks to survive the financial crisis and boost competitiveness through scale. A merger would have created Japan's sixth-largest bank.
Since then, Aozora has recovered while Shinsei continued to struggle.
Aozora swung back to black last fiscal year, with a net profit of 8.3 billion yen (US$89.8 million) after a 242.6 billion yen loss the previous year. Its capitalization is among the best in the country, with its Tier 1 ratio at 15.2 percent. The higher the ratio, the more stable a bank is generally considered to be.
Meanwhile, Shinsei posted a net loss of 140.1 billion yen, staying in the red for a second straight year. Its Tier 1 capital ratio stood around 6.4 percent.
A group of investors, including affiliates of US private equity firm JC Flowers & Co, owns 32.5 percent in Shinsei. Cerberus Capital Management LP, also of the US, owns 55 percent of Aozora shares.
Merger talks derailed when the two sides could not agree on integration issues and how the combined entity would pursue future growth. The gap in their capital health also proved fatal to the deal.
Aozora President Brian Prince told reporters that Shinsei's core capital was not sufficient, according to the Nikkei financial daily.
Instead, the two lenders said they would pursue independent paths but are considering establishing a business alliance.
"We canceled the merger plan, but intend to cooperate in areas we can," said Shinsei President Masamoto Yashiro, according to Kyodo news agency.
Along with its disappointing earnings report, Shinsei announced an overhaul of its executive team and a new business model.
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