Mitsubishi Tokyo Financial Group Inc. said Friday it has injected 700 billion yen into UFJ Bank, two weeks ahead of schedule, apparently to block a hostile takeover bid for UFJ Holdings Inc. by Sumitomo Mitsui Financial Group Inc.
The move puts MTFG a step closer to its planned merger by October 2005 with struggling UFJ Holdings.
“The early injection is expected to play a big role in countering a hostile bid by Sumitomo Mitsui,” said Nozomu Kunishige, a bank analyst at BNP Paribas Securities (Japan) Ltd.
MTFG replenished the capital base of UFJ Bank, the major component of the UFJ group, by buying preferred UFJ shares.
With the preferred shares, MTFG will have the effective right to control UFJ Bank’s management starting on Saturday.
MTFG, the nation’s second-biggest banking group in terms of assets, originally planned the capital injection for UFJ, the smallest and weakest of the country’s four mega-banks, no later than Sept. 29 according to a Sept. 10 deal between MTFG and UFJ.
Speculation that SMFG, the third-largest mega-bank, may launch a takeover bid for UFJ has lingered.
In a takeover bid, a bidder publicly announces its plan to take a controlling stake in the target company by offering to buy the company’s shares above market price.
SMFG has stated that it may take further steps to persuade investors that SMFG would be the best partner for UFJ.
Possible steps include “direct contact” with UFJ shareholders, it said in a statement released Sept. 10.
Friday’s capital infusion raised a barrier for SMFG to launch a bid of this kind.
But Kunishige and other experts cited another concern for UFJ: Some non-Japanese UFJ shareholders are reportedly considering legal action against UFJ over its rejection of negotiations with SMFG. SMFG’s merger proposal includes a one-to-one merger ratio, largely considered favorable to UFJ.
MTFG has not yet announced a merger ratio.
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