Shinsei hires Morgan Stanley for ‘poison pill’ to thwart SBI takeover
Japanese bank seeks to block hostile approach from online financial group
Shinsei Bank has engaged Morgan Stanley to help engineer a “poison pill” takeover defence after the company was left reeling by a $1.1bn hostile stakebuilding approach from Japan’s biggest internet brokerage.
People close to Shinsei said on Tuesday night that the bank was in discussions with its advisers on a large issuance of dilutive new shares in a gambit that used to be part of the corporate Japan playbook, but has been discouraged in recent years by activist shareholders and the country’s own corporate governance code.
Shinsei’s rising desperation follows an unsolicited bid last week from SBI, the online financial conglomerate that has set its sights on becoming Japan’s newest “megabank” and is run by the iconoclastic Yoshitaka Kitao.
SBI’s unsolicited tender offer, which placed a 38 per cent premium on the value of Shinsei Bank’s shares at their close last Wednesday, was aimed at increasing its stake from the current 20 per cent to 48 per cent.
If successful, SBI would seek to eject Shinsei’s board of directors and replace it with a new one of its choosing, the conglomerate said in a statement issued along with the tender offer.
The surprise strike by SBI follows a series of failed efforts by Kitao to negotiate to create a closer partnership between the two banks via business and capital tie-ups. Instead of deepening its relationship with SBI, Shinsei began talks on a tie-up with SBI’s domestic arch-rival Monex.
The SBI approach, which has become the latest test of Japan’s stance towards hostile corporate moves, came with Kitao’s blunt criticism of Shinsei’s management, its governance and of its inability to address fundamental flaws in its profitability.
Kitao’s efforts to build the influence and scale of SBI has involved a series of stakebuilding exercises in several of Japan’s weakest regional banks — financial institutions whose overall fragility has become a matter of steadily increasing concern to financial regulators and the Bank of Japan.
Government efforts to encourage defensive mergers among regional banks have struggled. People close to SBI said that Kitao’s strategy of coming to the rescue of the most endangered had won him the support of several senior figures within Japan’s Financial Services Agency.
Shinsei is considering issuing new share rights to existing shareholders, a move that would require approval at an extraordinary shareholder meeting. The aim is to buy time to extend the deadline for SBI’s tender offer, according to one of the people with knowledge of the discussions. The proposal has not formally been approved by the company’s board.
Shinsei was not immediately available for comment. Morgan Stanley declined to comment.