The Acquisition Bid for UFJ Holdings
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Case Details:
Case Code : BSTR133
Case Length : 17 Pages
Period : 2000 - 2004
Organization : Sumitomo Mitsui Financial Group, UFJ Holdings
Pub Date : 2004
Teaching Note :Not Available
Countries : Japan
Industry : Banking
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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EXCERPTS
UFJ's Need for a Partner
UFJ was the weakest of Japan's major banks with the largest quantum of non-performing loans. The bank had incurred a loss of ¥2.24 tn in the past three fiscal years with bad loans amounting to ¥306 bn.
UFJ had generated revenues of ¥2,520.659 bn in the fiscal year 2003, a 20.3 per
cent decline from the previous year.
The bad loans of UFJ for the fiscal year 2001 amounted to ¥6482.1 bn and ¥4163.5 bn
in the fiscal year 2002.
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In the first quarter ending June 30 2004, UFJ recorded a loss of ¥91.6 bn as bad loans grew by more than 10 per cent of total loans disbursed, compared to 8.5 per cent in March 2004. The capital adequacy ratio fell to 9.01 per cent from 9.24 per cent for the same period.
Moreover, in May 2004, when the FSA asked it to reclassify a significant amount of UFJ's loans as non-performing, the bank reported a loss of ¥400 bn. As many banks in Japan were facing financial problems, FSA, which had been injecting funds into the troubled banks, gave an ultimatum that these banks should reduce their non-performing loans as on September 2002, by 50 per cent by April 2005...
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The Offer of SMFG
As soon as news of the merger plans was made public, STB reacted. STB filed a petition in the District Court of Tokyo against UFJ and requested the court to stop the proposed merger on the grounds that UFJ had earlier promised to sell its trust banking business to STB.
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SMFG claimed that UFJ and STB had reached an agreement, according to which both parties had exclusive negotiation rights; and that the agreement also contained a provision, which required the party violating the agreement to pay a penalty. It further said that both parties were scheduled to sign a formal contract regarding integration of the trust businesses on July 22, 2004. The District Court of Tokyo ruled that UFJ should honour its agreement with STB and should not proceed with the merger talks with MTFG. Immediately, UFJ appealed against the court ruling, which too was dismissed. UFJ
then filed an appeal in the Tokyo High Court against the District
Court's ruling. |
Following this, SMFG sent a new merger proposal with UFJ in August 2004...
Excerpts Contd... >>
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