Japanese Banks call off Merger Plans Amid Differences
Japan’s Shinsei Bank Ltd. and Aozora Bank Ltd. — two midsize lenders with major U.S. shareholders — could call off their plan to merge later this year amid differences over management, strategy and system integration, news reports said Saturday.
The two companies announced the merger plan in July, saying the combined entity would be Japan’s sixth-largest bank with assets of about 18 trillion yen ($200.7 billion).
However, Japan’s leading Nikkei business newspaper said Saturday the banks have been unable to bridge differences over management policy or come up with a growth strategy. Kyodo News agency also reported they are at odds over how to integrate their banking systems, and what their core banking business should be.
The Nikkei quoted executives it did not identify from both banks for its report. Kyodo quoted sources it did not name.
Kyodo said if an agreement cannot be reached, the banks may drop the merger and pursue independent paths. The Nikkei said the banks are considering whether to call off the merger or postpone it indefinitely.
Shinsei Bank said in a statement on its Web site it had no comment. Aozora Bank could not immediately be reached.
A group of investors, including affiliates of U.S. private equity firm J.C. Flowers & Co., holds a 32.5 percent stake in Shinsei, while an entity of Cerberus Capital Management LP, also of the U.S., owns 45.5 percent of Aozora shares, according to information posted on the Web sites of the two banks.
Shinsei and Aozora said in July the merger would take effect in October 2010.
Hit by restructuring costs and fruitless overseas investments, Shinsei reported a net loss of 143 billion yen last fiscal year through March 31, 2009. Aozora posted a net loss of 242.5 billion yen.
The banks have returned to profitability so far this year, however, with Shinsei reporting a net profit of 22.2 billion yen in the first nine months of the fiscal year through Dec. 31. Aozora reported net profit of 7.3 billion yen for the same period.
The Japanese government bailed out the predecessors of both banks during a domestic banking crisis in the 1990s.