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SBI Holdings Inc, a Japanese online financial conglomerate, said on Wednesday that it is considering taking its publicly traded subsidiary Shinsei Bank Ltd private in order to return $3 billion in public funds.
A delisting would be a significant step for Shinsei, which has been unable to repay public funds received by its predecessor bank two decades ago because its shares have underperformed during Japan’s years of low interest rates.
“It’s an option worth pursuing,” SBI’s chief executive, Yoshitaka Kitao, told a news conference. In a tender offer this month, the group effectively took control of Shinsei, a mid-sized lender.
Kitao stated that the group has begun discussions about the possibility and intends to discuss it with the Financial Services Agency, the regulator. He stated that he would consider a variety of options, including allowing Shinsei’s minority shareholders to exchange their stock for SBI stock.
With a market capitalization of nearly 500 billion yen, Shinsei Bank still owes the government 350 billion yen ($3.09 billion). As a result, the government owns approximately 20% of Shinsei. Shinsei stock would have to rise to 7,450 yen in order to recoup the entire amount lent by selling shares on the market.
On Wednesday, its shares closed at 1,907 yen, up 5.9%. Shinsei shares have had a difficult time since their initial public offering in 2004, with a total return of minus 74%. After private equity investor JC Flowers & Co sold down its holding in Shinsei in 2019, SBI, the financial unit of SoftBank Group until the firm left SoftBank in 2006, took a stake in the company.
After Shinsei’s predecessor bank went bankrupt in Japan’s late 1990s banking crisis, JC Flowers and buyout fund Ripplewood purchased it. As a result, it became the first Japanese lender to be owned by foreign investors, and the subsequent initial public offering netted JC Flowers and Ripplewood a large profit.
Story by : Norvisi Mawunyegah