Shinsei’s Top Shareholder Can’t Sell, Even at a 39% Premium

(Bloomberg) -- While SBI Holdings Inc. has offered an attractive 39% premium in its $1.1 billion offer to take control of Shinsei Bank Ltd., one shareholder is going to find it hard to sell at that price -- the Japanese government. 

The government is the top shareholder in Shinsei, via stakes held by the Deposit Insurance Corporation of Japan and the Resolution and Collection Corporation. It holds a combined 21.8% on a voting rights basis. The stakes are a result of its 1998 bailout of the lender’s predecessor, the Long-Term Credit Bank of Japan Ltd. 

When the government eventually exits, it’s required to secure 350 billion yen to avoid a loss to the public coffers. That would necessitate selling at around 7,500 yen a share, about 3.8 times the 2,000 yen per share that SBI is offering. 

While Shinsei traded above that price in the mid-2000s, its stock has never recovered to those levels since the financial crisis. Before SBI’s tender offer, it traded more than 80% off its all-time high. 

Japan’s SBI Offers to Boost Shinsei Stake in Banking Push

Finance Minister Taro Aso acknowledged the dilemma. “As long as taxpayers are paying for it, we need to look at it from the perspective of preserving our claims,” he said at a press conference in Tokyo on Friday. If the funds are ever recovered, the proceeds from the sale will be paid to the national treasury, which is facing increased pressure from the pandemic. 

©2021 Bloomberg L.P.