Banking: medium size Japanese banks to join to create top six bank
The was a time when creating the sixth biggest bank in Japan would create a global buzz. Now, when mergers and takeovers are often as much an indicator of a fight for survival as they are of a statement of intent on the way to global domination, the proposed deal between Aozora and Shinsei merits hardly a glance.
Of course, the M&A gravy-trainers will be lapping it up: it's been a year of slim pickings so far. Whilst it's not true, it often seems as if insolvency specialists will have made more money out of the current financial sector shakeout than M&A advisers.
But in fact, the proposed deal is highly significant - for it again raises the issues of cross-border ownership of financial institutions.
Both Aozora and Shinsei are making losses. So the idea is, on the face of it, a way of cutting overhead to make one bank with a chance of being profitable.
But, although listed in Tokyo, both banks have substantial foreign investment - in fact, both are backed by American private equity funds.
And there is sense in the deal: Aozora has a liquidity shortage but a strong balance sheet and asset base; Shinsei has the opposite problem.
The two funds involved are Cerberus Capital Management (Aozora) and JC Flowers and Co.(Shinsei).
In an ironic twist of fate, the two banks were nationalised in the Japanese banking crisis in the late 1990s. When the Japanese government wanted to dispose of the banks it owned, foreign money was welcome.
The situation they are in raises the question of how other countries, now in the same position, will find a way out of the banks they now have in public ownership.
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