Daiwa Securities Group Inc. is poised to expand its ownership in Aozora Bank, a struggling Japanese bank, by acquiring an additional 9.1% stake.
This acquisition, worth approximately 25 billion yen, will grant Daiwa 23.95% of voting rights in Aozora. The transaction will take place in two stages. The first stage will occur on June 24, while the second stage will follow the completion of regulatory procedures.
In light of their partnership, Daiwa and Aozora have plans to collaborate in wealth management, real estate, mergers and acquisitions, and startups. In February, Aozora Bank shocked the market with losses on its office property loans in the US. This caused its shares to plummet and its value to decrease by one-third in just two days. Although the stock is still down 22% for the year, the Topix banking index has experienced a 34% gain.
For Daiwa, this investment is a strategic move that anticipates Aozora’s recovery. Following the Bank of Japan’s decision to end negative interest rates, there is potential for increased domestic lending income. By acquiring a stake in Aozora for approximately 51.4 billion yen in May, Daiwa provided the bank with fresh capital. As interest rates rise, the banking industry is expected to become more profitable. Moreover, having a stable major shareholder like Daiwa will contribute to overall stability.
This deal brings an end to the speculation surrounding potential actions by City Index Eleventh, an investment fund linked to activist investor Yoshiaki Murakami and his daughter, Aya Nomura. Despite not making any public demands on the bank, City Index Eleventh’s involvement has been a subject of discussion for months.
Daiwa will pay 2,415.5 yen per share, resulting in a total investment of approximately 27.9 billion yen ($177 million).
