Mitsubishi Tokyo Financial Group (MTFG) has offered $29 billion for fourth-ranked lender UFJ Holdings today to end months of silence over the terms of its bid to create the world's biggest banking group.
The offer from MTFG, Japan's second-biggest bank, which counters a rival bid by third-ranked Sumitomo Mitsui Financial Group (SMFG), values UFJ at a 3.1 per cent premium to its closing share price today and comes six months after MTFG and UFJ agreed in principle to merge.
Although MTFG's offer falls short of the nearly $35 billion being offered by SMFG, it may still satisfy UFJ shareholders, given doubts about SMFG's ability to absorb UFJ and UFJ managers' strong preference for MTFG.
If successful, the merger would be the largest ever in corporate Japan. It comes as the revitalised banking sector sheds years of accumulated bad debt and seeks new alliances to boost profit and cut dependence on low-yielding corporate loans.
With its solid finances and strong presence in the Tokyo area, particularly in corporate lending, MTFG is widely seen as a good match for UFJ, which has built a solid retail business from its base in the western cities of Osaka and Nagoya.
As part of the merger plan, MTFG and UFJ said they would aim for a group net profit of 1.1 trillion yen ($8 billion) for the merged entity in the business year to March 2009.
They said they would seek annual cost cuts of 240 billion yen €1.7 billion from 2008/09, partly by slashing some 6,000 jobs.