• Kyodo

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Japanese online financial firm SBI Holdings Inc. launched Friday a tender offer to make smaller rival Shinsei Bank a subsidiary as part of SBI's attempts to become a "fourth megabank" in Japan, with buy orders pouring in for the bank's shares.

SBI's offer, through Oct. 25, was not approved by the Shinsei Bank board in advance and could end up in a hostile takeover. Shinsei Bank shares soared ¥300, or 20.8%, to close at ¥1,740 on Friday.

SBI already owns roughly a 20% stake in Shinsei Bank and plans to increase it to a maximum of 48%. It offers ¥2,000 a share, nearly a 40% premium to Thursday's closing price of ¥1,440. The deal could total around ¥116.4 billion.

The financial group, led by CEO Yoshitaka Kitao, had been stepping up purchases of Shinsei Bank shares and repeatedly sought in vain to form a capital alliance since September 2019, partly because the Shinsei Bank board is opposed to the idea of SBI becoming a larger shareholder.

The SBI group has been strengthening alliances with regional banks to push for their reorganization, an idea shared by Prime Minister Yoshihide Suga, who is known to be close to Kitao but is stepping down at the end of the month.

Shinsei Bank has strengths in the consumer loan and credit card businesses, though it has yet to repay public funds received when its predecessor, the Long-Term Credit Bank of Japan, collapsed in 1998.

"Since (the government) injected public funds, namely taxpayers' money, into the bank, we certainly have to respond to the issue in terms of ensuring debt collection," Finance Minister Taro Aso said at a news conference. Shinsei Bank has received ¥370 billion in public funds.

Aso also said other major stockholders in Shinsei Bank such as the government-linked Deposit Insurance Corporation of Japan "should judge properly" the tender offer and the government "will need to communicate well" with them.

If the offer is successful, SBI said Thursday it will appoint Hirofumi Gomi, a former head of the Financial Services Agency, as chairman of the Shinsei Bank board, adding a detailed policy on repaying the public funds will be discussed.

SBI has formed a capital alliance with various regional banks, including Shimane Bank and Fukushima Bank, in its ambitious quest to become the largest bank after the top three megabanks — MUFG Bank, Sumitomo Mitsui Banking Corp. and Mizuho Bank.

Suga, who took office in September last year, has prioritized reorganizing the regional banking sector. The Bank of Japan also has an incentive program to promote mergers between regional banks.

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