Merging with UFJ Central Leasing to form Mitsubishi UFJ Lease (2006)

The order of an integration, and its content

Seen only as a sequence — the megabanks combine, then their leasing affiliates become one — this merger looks like downstream processing of a decision taken upstream. Yet set the announcement documents beside the interviews of the time and what the participants spent the most time explaining was neither the choice of partner nor the size of the result, but the question of which law they would stand under afterwards. Becoming a consolidated subsidiary of a bank thickens the backing behind your funding, but restricts the business of buying and selling assets. Choosing to remain listed was a trade: give up part of the parent’s credit, take freedom of action in the business.

Whether that judgment was right could not be seen within a few years of the merger. Accounting changes thinned demand for leases, interest rates turned, and the scale won by merging could as easily have become an asset that cost only upkeep in a headwind. The effect showed up in the 2010s, when the company steered toward assets whose residual values it could read and trade — aircraft, containers. Behind a simple one-for-one share exchange, what Diamond Lease was really deciding was to stop being a function of a bank.

Fourteen years after the 2007 merger, Mitsubishi UFJ Lease merged with Hitachi Capital to become Mitsubishi HC Capital. The company that carried an integration across the boundaries of the old corporate groupings was the one that had built its scale while standing outside the banking law.