The Japanese government is considering using its stake in Shinsei Bank to vote against the launch of a defense against a hostile takeover by online financial group SBI Holdings Inc., sources familiar with the matter said Monday.
As the combined stakes held by SBI and the government amount to around 40 percent, it appears unlikely that Shinsei Bank would secure approval for the steps with majority backing at an extraordinary shareholders meeting on Thursday, the sources said.
Related coverage:
Shinsei Bank rejects SBI's tender offer, set for hostile takeover
SBI flags extension of tender offer if Shinsei Bank meets demands
Shinsei Bank decides to launch defense against SBI's takeover
The government holds a stake of about 20 percent in Shinsei Bank as its predecessor, the Long-Term Credit Bank of Japan, collapsed in 1998 and received around 370 billion yen ($3.2 billion) in public funds for its rehabilitation, though it has yet to repay most of the injected taxpayers' money.
The government is believed to look favorably on a growth plan proposed by SBI. The rejection would also be in line with the government's position of urging companies not to take defensive measures against takeovers to protect existing managements, according to the sources.
However, the situation remains fluid as some government officials are hesitant to intervene in the battle between the bank and the online financial group.
The government will continue discussions until shortly before the shareholders meeting, they added.
Shinsei Bank's envisaged defense would entail issuing new shares to existing shareholders to dilute SBI's holdings. It could drop the plan if it judges that securing shareholder support to block the takeover would be difficult.
In September, SBI launched a tender offer to make Shinsei a subsidiary by raising its stake from roughly 20 percent to 48 percent.
Shinsei, which has strong consumer loan and credit card businesses, still needs to repay the remaining injected public funds of around 350 billion yen.
If the government seeks to recoup the funds by selling Shinsei stock, the price per share must be at 7,450 yen, far above the around 1,400 yen before SBI's announcement.
The SBI group, which formed a capital alliance with various regional banks, has stepped up purchases of Shinsei shares and repeatedly sought in vain to form a capital alliance since September 2019, with the bank board opposing the idea of the financial group becoming a larger shareholder.
