Resona, Japan's fourth-largest lender by assets, will acquire the 49% of Osaka-based regional lender Kansai Mirai it does not already own through a tender offer bid (TOB) and a stock swap, the bank said in a statement.
The move comes as Japanese Prime Minister Yoshihide Suga has pledged to strengthen local economies and encourage regional banks to consolidate and as the Bank of Japan unveiled on Tuesday a scheme aimed at incentivising regional lenders to consolidate.
Resona will pay 500 yen ($4.76) per share in Kansai Mirai in the TOB, which will be conducted from Nov. 11 through Dec. 9, according to the statement. The price has a premium of 23.46% to Monday's closing price.
The lender said it would allocate 1.42 Resona shares per Kansai Mirai share, if shareholders don't accept the tender offer.
"We are facing an unprecedented business environment and need to prepare for a long-term battle after the coronavirus pandemic," Masahiro Minami, Resona's president, told reporters at a news briefing.
Sumitomo Mitsui Financial Group Inc, which owns 23.5% of Kansai Mirai, has agreed to hand over all of the shares through the tender offer and a stock swap, Resona said.
Kansai Mirai will be delisted from the Tokyo Stock Exchange in March if the deal is completed, according to the two banks. That would avoid the Japanese practice of "parent-child" listings, which some analysts say is not good for investors as the subsidiary may follow the parent's directives rather than act in the best interest of shareholders.
Such a move was also seen in a deal by Nippon Telegraph and Telephone Corp (NTT) which said in September it would launch a tender offer for the 34% of NTT Docomo Inc stock that it does not own, and Docomo would be delisted.
($1 = 105.0300 yen)
(Reporting by Takashi Umekawa; Editing by Chang-Ran Kim, Tom Hogue and Susan Fenton)
By Takashi Umekawa