Acquiring and consolidating Shinsei Bank (2021)

Winning a core bank, and a national homework

At the heart of this acquisition was that SBI obtained, through a tender offer close to a show of force, the core bank its regional-alliance design had lacked. A purchase made without prior agreement had no precedent in the banking world, and Shinsei Bank resisted with a takeover defense. But what decided the contest was neither the market nor management — it was the state, which held about a fifth of the voting rights. The moment the state decided not to back the defense, Shinsei’s resistance lost any prospect of holding. At a bank where the state is deeply involved in the capital through public funds, this episode shows, the ownership of control is settled by a logic different from that of an ordinary corporate acquisition.

Winning the core bank, though, came bound together with a heavy homework of repayment. The public funds — about $3.2B (¥350bn) still outstanding at the time of the acquisition — are hard to repay in full under the constraints of share price and dividends, and SBI sought, by taking the bank private, to secure room to face the state. Put the other way, so long as the state remained a shareholder, SBI took on a condition in which it could not make this bank wholly its own. A company that started from online brokerage taking on the successor to a failed former long-term-credit bank — and the national task of that repayment along with it — reflects at once the strength of SBI’s will to hurry the regional alliance to completion and the size of the price that came with it.