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Shinsei, Aozora merger still not announced

Back on April 25, the Nikkei announced that Shinsei Bank and Aozora Bank were discussing a merger, citing “a person familiar with the matter.”

Then, on May 11, the Nikkei reported that the two banks had “reached a basic agreement to start procedures by summer 2010 to merge their operations under a holding company.” The article went on to speculate that the merger might have been announced by the end of May:

The two banks apparently have secured approval from their leading shareholders after briefing them on the means and objectives of the merger. They will now work out such details as the merger ratio and executive lineup, announcing them as early as the end of this month.

That announcement still has not come.

Two days later, on May 13, Shinsei announced a net loss of 143.1 billion yen for FY2008, compared to the 60.1 billion yen net profit the firm had earned in FY2007. Of course, these figures had been forecasted before the May 11 article was written.

Shinsei closed Tuesday at 135 yen per share, just shy of 5% lower than the closing price of 142 yen per share when the basic agreement to the merger was announced on May 11. On that day, Shinsei shares had moved up as high as 147 yen per share on interday trading. That price is the highest seen in the past 12 months.

No news on the merger has hit the press since May 11. On May 28 it was announced that Shinsei would be converting its subsidiary Aplus, a consumer lending firm, into a holding company called Aplus Financial as of April 1, 2010. That news, however, does not seem to have hit the English language media.

Will there actually be a merger to announce? On the same day that FY2008 results were released, the Nikkei wrote that Shinsei President Masamoto Yashiro told reporters that the bank would look into increasing capital. According to the Nikkei:

Asked if it will be able to raise funds in the capital market, Yashiro said: “If you can’t raise enough in the market, then you will have to study other options.”

When asked about the possibility of being recapitalized by the government again, Yashiro said the bank had not make a decision. As for the repayment of public funds already injected, “We cannot draw up any repayment plan now,” he said. “It depends on how stock prices will move.”

Although the Nikkei’s English article makes no mention of the merger, the writeup in Japanese includes one small quote. When asked about the merger with Aozora, Yashiro said, 「上場会社なので決定していないことをコメントするのは適切でない。」 In other words, “As we are a listed company, it would not be appropriate to comment on something not decided.”

For now, we’ll have to wait. Of course it’s possible that an announcement could come tomorrow. On the other hand, it seems as though a media silence has been put in place and the announcement having been pushed back beyond what was originally projected without any comment might be cause for concern.

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