A group of investors led by U.S. buyout firm J.C. Flowers & Co will bid about $1.8 billion for up to 32.6 percent of Shinsei Bank, reinvesting in the Japanese bank it helped resurrect in one of the most lucrative private equity deals ever.
Aozora Bank, another mid-sized Japanese lender revived and floated by overseas investors, separately announced a on Tuesday it was forming a business alliance with the larger Sumitomo Trust & Banking.
The two deals underscore a scramble by Japanese banks to forge ties with rivals to boost efficiency and find new growth drivers as their core lending businesses remain sluggish and they suffer losses on the U.S. subprime loan market.
J.C. Flowers partnered private equity firm Ripplewood to buy the failed Long-Term Credit Bank of Japan in 2000. They renamed it Shinsei and took it public in 2004, reaping billions of dollars in profits for the deal's backers.
Shinsei said in a statement that the J.C. Flowers-led group would bid for a 22.7 percent stake in Shinsei at 425 yen per share from Nov. 22 to Jan. 10.
Shinsei also plans to issue 50 billion yen in new shares, which would result in the group and affiliates of J.C. Flowers holding up to 32.6 percent in Shinsei. J.C. Flowers held 5.5 percent as of the end of March, according to Reuters data.
Shinsei said it would bolster its institutional banking, consumer and commercial finance and retail banking operations.
"With the backing of key shareholders aligned with the bank's senior management, we receive additional resources to develop and expand our businesses," Shinsei chief executive Thierry Porte said in a statement.
J.C. Flowers, run by U.S. financier Christopher Flowers, will be buying into the bank after its shares have tumbled about 40 percent this year, hit by its exposure to Japan's deteriorating consumer finance industry and subprime-related losses.
The deal also comes amid speculation Flowers will submit a bid for ailing British bank Northern Rock.
Investors in the investment vehicles due to acquire Shinsei shares also include Grupo Santander, Swiss Re, as well as Porte and Shinsei Chairman Junji Sugiyama. A breakdown of each party's stake was not disclosed.