Cerberus to End Control of Aozora in $1.8 Billion Stake SaleShigeru Sato and Shingo Kawamoto
Cerberus Capital Management LP, the U.S. investment firm that controlled Aozora Bank Ltd. since 2003, is set to offload its holding after the Japanese lender’s stock tripled over four years.
The private equity company will sell as many as 632.5 million shares at a price to be determined as soon as Jan. 16, Aozora said in a statement yesterday. The shares were valued at 158.1 billion yen ($1.8 billion) based on the close in Tokyo.
Cerberus, which oversaw a turnaround at Aozora that included eight years of profit and a 2006 initial public offering, will pare its investment as the bank prepares to pay back a taxpayer bailout, repurchase shares and boost dividends. Aozora fell for a second day today on the news that the buyout firm, which began accumulating its stake in 2000, would exit.
“It doesn’t look like a bad time” for Cerberus to sell as the shares have climbed, said David Threadgold, a Tokyo-based analyst at Keefe Bruyette & Woods Inc. “Cerberus is a private-equity fund and has been looking for an exit for a long time.”
Cerberus will reduce its voting rights to 7.7 percent from 57.8 percent, the Japanese bank said. As many as half of the shares, or 316.25 million, will be offered to overseas investors.
Aozora, which increased threefold since the end of 2008 to yesterday, declined 4.4 percent to 239 yen at 9:43 a.m. in Tokyo trading. The stock has dropped 58 percent since it sold shares at 570 yen apiece in 2006 in the biggest Japanese IPO in two years. The nation’s Topix Banks Index has lost 67 percent in the same period.
Citigroup Inc. and Morgan Stanley will coordinate the global offering, according to the statement. Goldman Sachs Group Inc. and Barclays Plc will help manage the overseas portion, while Daiwa Securities Group Inc. and Mitsubishi UFJ Financial Group Inc. will work on the domestic sale, Aozora said.
The Japanese bank said in September that New York-based Cerberus planned to sell some of its shares, without disclosing the portion. The same month, Tokyo-based Aozora said it will pay 227.6 billion yen to taxpayers over 10 years, as well as buy back stock and pay a bigger percentage of profit as dividends.
“Cerberus probably made a decent return despite a slew of unattractive factors in Japan such as the shrinking population and slowing economic growth,” said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo. “Aozora is a domestically driven bank that needs a dramatic business strategy to attract investors after Cerberus leaves.”
Cerberus -- named after a mythological three-headed dog that guards the gates of Hell -- lost a bid to gain control of Aozora in 2000, before succeeding in 2003 when it bought a stake held by mobile carrier Softbank Corp. The lender’s predecessor, Nippon Credit Bank, failed in 1998 as bad loans mounted following the collapse of the nation’s asset bubble. After being temporarily nationalized, the bank was privatized in 2000.
Aozora, which means “blue skies” in Japanese, has since made a profit in every fiscal year except the 12 months ended March 2009, when the global financial crisis triggered a worldwide recession. It repaid 127.4 billion yen to the government when it listed on the Tokyo Stock Exchange in November 2006, after raising 351 billion yen from the IPO.
Weak credit demand is damping the profit outlook for Japanese banks in an economy that has shrunk for two straight quarters. Aozora’s net income will fall 14 percent to 40 billion yen in the year ending March, the bank forecast in November.
“Aozora may attempt to repay public debt earlier than planned to show their sound management” to prospective investors, said Toyoki Sameshima, a Tokyo-based analyst at BNP Paribas SA. “To do that, it must boost its bottom line, and that won’t be easy given sluggish lending demand at home.”