Government to nix Shinsei Bank’s defensive steps against SBI takeover bid

The government is considering using its stake in Shinsei Bank to vote against its 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 stake held by SBI and the government amount to around 40%, it appears unlikely that Shinsei Bank can win approval for the steps with majority backing at an extraordinary shareholders meeting Friday, the sources said.

Shinsei’s planned defense is to issue new shares to existing shareholders to dilute SBI’s holdings. To activate the poison bill defense, Shinsei Bank needs to obtain support from a majority of shareholders participating in the meeting, including those who exercise their voting rights beforehand.

The government, which owns an about 20% stake in Shinsei Bank, is believed to have given some credit to a growth plan proposed by SBI.

The government move is in line with its position of urging companies not to take defense measures against a takeover to protect existing management, according to the sources.

However, the situation is still fluid as some people within the government call for backing Shinsei Bank’s attempt to block the takeover by SBI, and the government will continue discussions until shortly before the shareholders meeting, they added.

By contrast, two U.S. proxy advisory companies with strong influence over foreign institutional investors have recommended supporting Shinsei Bank’s proposal to invoke the takeover defense measure.

In September, SBI launched a tender offer to make Shinsei Bank a subsidiary by raising its stake from roughly 20% to 48%.

Shinsei Bank has strengths in the consumer loan and credit card businesses, though it has yet to repay public funds received when its predecessor, the Long-Term Credit Bank of Japan, collapsed in 1998.

The SBI group, which formed a capital alliance with various regional banks, had been stepping up purchases of Shinsei Bank shares and repeatedly sought in vain to form a capital alliance since September 2019, with the Shinsei Bank board opposing the idea of SBI becoming a larger shareholder.

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