Japan’s Shinsei Bank poison pill defence backed by proxy advisory firm

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The Shinsei Bank logo is pictured at the lobby of the bank in Tokyo

By Makiko Yamazaki

TOKYO -U.S. proxy advisory firm Glass Lewis & Co on Friday recommended shareholders of Japan’s Shinsei Bank Ltd vote for the lender’s plan for a poison pill defence against an unsolicited $1.1 billion bid from SBI Holdings Inc.

Mid-sized bank Shinsei opposed SBI’s approach last month, saying that the partial takeover offer could hurt interests of minority shareholders and that the offer price was too low. SBI, which owns an online brokerage and a bank, holds around 20% of Shinsei and wants to raise that to up to 48%.

The recommendation from Glass Lewis is likely to be seen as a setback for SBI, which sees Shinsei as part of a plan to create Japan’s fourth-largest bank. Shinsei has said it would accept the offer if SBI raised the price and removed the upper limit on how much it would buy, but SBI rejected those requests.

“Shinsei’s independent investors have been presented with a pointedly inequitable partial cash out, to be followed by a significant, one-sided restructuring very likely to involve substantial board and executive turnover and a heavily revised strategic profile,” Glass Lewis said in its recommendation.

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“In a rare case, we believe this framework alone is arguably sufficient to warrant support for Shinsei’s proposed defence measures.”

SBI, which says it can overhaul the mid-sized lender, has promised to make every effort to repay the 350 billion yen ($3.1 billion) in public money Shinsei received during a banking crisis two decades ago.

However, Glass Lewis said SBI had offered investors “no meaningful plan to address this issue”.

Separately, the government-affiliated Deposit Insurance Corp of Japan said on Friday it sent both SBI and Shinsei a set of questions asking specifically how they can increase Shinsei’s corporate value. The government owns around 20% of Shinsei.

Shinsei’s shares closed down 3% on Friday at 1,808 yen, below SBI’s offer price of 2,000 yen a share.

($1 = 113.6500 yen)

(Reporting by Sakura Murakami and Makiko Yamazaki; Editing by David Dolan, Kenneth Maxwell, Emelia Sithole-Matarise, Kirsten Donovan)