Shinsei Bank drops defense plan against SBI's hostile takeover

© Kyodo News

Shinsei Bank said Wednesday it will drop its plan to launch a defense against a hostile takeover bid by SBI Holdings Inc., making it almost certain that the midsize Japanese lender will come under the wing of the major online financial group.

Shinsei had objected to SBI's unsolicited tender offer to raise its stake from around 20 percent to 48 percent. An extraordinary shareholders' meeting of Shinsei planned for Thursday to seek approval for the defense plan was canceled.

SBI's move has been in the spotlight because Japan's banking sector has never seen a hostile takeover.

Shinsei's last-minute change of mind came after SBI agreed to respect the lender's management stance and growth strategy, and to jointly boost its corporate value, the bank said.

Shinsei said it will accept three candidates picked by SBI to serve as its board members, including Hirofumi Gomi, a former head of the Financial Services Agency, and hold an extraordinary shareholders' meeting in February to seek approval.

Shinsei had sought to block the takeover attempt by taking a poison pill defense, or issuing shares to existing shareholders to dilute SBI's stake.

The prospects for Shinsei to win approval for its defense plan against the tender offer from September to Dec. 8 had appeared dim.

Two major proxy advisory firms recommended that shareholders vote for the launch of the defense while the government, which holds over a 20 percent stake in Shinsei, was considering voting against it, according to sources with knowledge of the situation.

SBI has an ambitious goal of becoming a fourth Japanese megabank and has formed alliances with regional banks facing tough times under the Bank of Japan's negative interest rate policy amid the prospect of a shrinking population.

The financial group headed by CEO Yoshitaka Kitao aims to revamp Shinsei's management and pave the way for the repayment of some 350 billion yen ($3 billion) in public funds, by taking effective control of the bank that has strengths in consumer loans and credit card businesses.

Shinsei's predecessor, the Long-Term Credit Bank of Japan, was one of the major lenders during the country's high-growth period but it collapsed in 1998 after the asset bubble burst. It was temporarily nationalized.