Shinsei Bank claims SBI’s explanation not enough over takeover bid

Shinsei Bank said Thursday major online financial firm SBI Holdings Inc. has failed to give a sufficient explanation on events leading up to its abrupt launch of an unsolicited takeover bid for the bank.

Shinsei Bank has yet to clarify its stance on the planned takeover but pointed out in a statement addressed to shareholders that some information given by SBI is “inaccurate” or “insufficient.”

With its ambitious goal to become the fourth megabank in Japan, SBI is seeking to make Shinsei Bank a subsidiary by raising its stake to a maximum of 48% from the current 20% in a tender offer announced last week worth around ¥116.4 billion ($1.06 billion).

The release of the statement Thursday points to a bumpy road ahead for SBI’s bid even as Shinsei Bank said its board will discuss the matter on Friday.

In the nine-page document, Shinsei Bank rejected SBI’s claim that it had sought to form a capital alliance “on a continuing basis” following its failed attempt in 2019.

According to Shinsei Bank, SBI’s proposal back then included a plan for the bank to squeeze out existing ordinary shareholders by buying back its shares in the market after SBI conducted a tender offer.

SBI was to buy Shinsei shares owned by the state at a price “far exceeding fair value,” a transaction aimed at repaying the public funds the predecessor of the bank had received, but the plan appeared “unrealistic” at the time as it was unlikely that other shareholders would tender their shares in Shinsei’s buyback program knowing SBI would pay more, the bank said.

Since 2019, SBI has been stepping up the purchase of Shinsei Bank shares, prompting the bank to convey its concern.

Despite its president saying in April 2020 that SBI would not increase its holdings further after its stake reached 10%, the Japanese financial firm did not stop buying and it owned 19.85% as of March this year, Shinsei Bank said.

SBI’s latest tender offer through Oct. 25 came as SBI takes issue with the current Shinsei Bank management that has struggled to improve its profitability and repay the public funds.

Shinsei Bank, for its part, has sounded out Sony Group Corp. about the possibility of making a counteroffer as a white knight, people familiar with the matter said earlier, raising the prospect of a bidding war for the bank, which has strengths in the consumer loans and credit card businesses.

Under CEO Yoshitaka Kitao, SBI has been beefing up alliances with regional banks as he aims to change the landscape of the regional banking industry. He is known to be close to outgoing Prime Minister Yoshihide Suga, who also sees the need for regional banks to reorganize.

Shinsei Bank’s predecessor, the Long-Term Credit Bank of Japan, collapsed in 1998. It received ¥370 billion in public funds and even now about 20% of Shinsei Bank shares are held by the state.