Nikko Cordial Corp. is in the final stages of talks to buy more than one-third of Tokyo Star Bank’s shares from the U.S.-based Lone Star Group investment fund, possibly leading to an outright purchase of the bank, sources said Friday.
The share acquisition, if successful, would mark the first time a brokerage has purchased such a large stake in a bank in Japan.
Nikko Cordial plans to launch a public tender offer for more than one-third of Tokyo Star’s outstanding shares, which trade on the Tokyo Stock Exchange’s first section.
The acquisition would cost Nikko Cordial more than 100 billion yen at Tokyo Star’s current stock price. The firm had a market capitalization of about 300 billion yen Friday.
Large banks, including Tokyo Star, have rid themselves of a large amount of nonperforming loans; major brokerages with cash thanks to the recent sharp rally in the stock market find these banks an attractive target.
In response, both banks and securities houses are expanding. If Nikko manages to acquire Tokyo Star Bank, another wave of consolidation may be in the offing, transforming the financial sector, observers said.
Nikko will have to get approval from the Financial Services Agency to carry out its plan because any move to a obtain a stake of 20 percent or more in a bank requires the permission from the financial regulator.
Tokyo Star, formerly Tokyo Sowa Bank, went bankrupt in 1999. The bank was relaunched in 2001 as Tokyo Star Bank with the help of Lone Star, which now owns about 70 percent of its shares. The bank went public on the TSE first section last October.
Lone Star has decided to sell most of its Tokyo Star shareholdings to Nikko to recoup its investment quickly, the sources said.
Last August, Nikko agreed to cooperate with Tokyo Star in sales of investment trusts and other areas.