Mitsubishi UFJ Financial clinches deal for UnionBanCal

TOKYO: Japanese megabank Mitsubishi UFJ Financial said Monday that it had sealed a deal to take full control of its US subsidiary Union Bank of California with an increased 3.5-billion-dollar bid. The two companies have signed a "definitive merger agreement" for Mitsubishi UFJ to acquire the 34.6 percent of the US bank that it does not already own, the Japanese group said in a statement.

Japan's biggest banking group was forced to sweeten its offer after a previous bid of 3.0 billion dollars was rejected as too low. Mitsubishi UFJ (MUFG) already owns 65.4 percent of the shares in UnionBanCal, the holding company for the Union Bank of California (UNBC), which ranks 20th largest in the United States in terms of deposit size.

It will launch a tender offer of 73.5 dollars in cash per UnionBanCal share, up from a previous offer of 63 dollars, a company statement said. The board of directors of UnionBanCal has decided to accept the revised offer. "This agreement will provide us with a wide range of opportunities to expand our presence in the US market," said Katsunori Nagayasu, president of The Bank of Tokyo-Mitsubishi UFJ, the main banking unit of the Japanese group.

The Japanese megabank is expanding in the world's largest economy despite the ongoing fallout from the US financial crisis. But while the credit crunch has battered US banks, it has also made them more affordable for foreign buyers willing to take the plunge.

Japanese banks, which are only just recovering from a domestic banking crisis in the 1990s, have so far been cautious about expanding overseas. The price tag for the deal appears to be a fair one, according to David Threadgold, an analyst at Fox-Pitt Cochran Caronia, which estimates the fair value of UnionBanCal to be 70 dollars per share.
"So 73.50 dollars seems like a small premium worth paying to get the approval of the special committee and the board of UBC," Threadgold told Dow Jones Newswires.
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"The extra money is neither here nor there for MUFG. They just want to get the deal done without any major problems," he added. Japanese banks' losses from the US mortgage crisis have been dwarfed by those of many of their foreign peers, although they have not escaped unscathed.Mitsubishi UFJ lost 81 billion yen on subprime-related investments in the year to March, when its net profits slumped almost 28 per cent.