JIN-285 -- Tough Love -- Japan's Bank Merger Soap Opera

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Commentary on the Week's Business, Technology and Cultural News
Issue No. 285
Tuesday, August 10, 2004

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@@ VIEWPOINT: Tough Love -- Japan's Bank Merger Soap Opera

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@@ VIEWPOINT: Tough Love -- Japan's Bank Merger Soap Opera

UFJ may be loss-making, deceitful and terrible at clearing up bad debts,
but it's suddenly become the centerpiece of a rather extraordinary love
tussle. We have a hostile merger proposal, a bidding war and the
certainty that whatever deal is finally cobbled together, the result
will be the world's biggest bank.

The banking sector's little trailer-park melodrama has a simple premise:
UFJ is washed up and in need of a strong partner like Tokyo Mitsubishi
to set it straight -- but part of UFJ's heart is already pledged to
Sumitomo Trust.

A restraining order was placed on Tokyo Mitsubishi and UFJ's breathless
courtship, at which point Sumitomo Mitsui -- an overweight bruiser
worried about a turf war -- strode into town. UFJ, bless her, wasn't
having any of it, solemnly declaring that, restraining order or not,
her future happiness could only lie with Tokyo Mitsubishi.

At this point, UFJ's board behaved atrociously. If Japanese newspaper
reports are to be believed, the president of UFJ would not even
accept a phone call from Sumitomo Mitsui to discuss an alternative

Even in Japan, where corporate governance is, at best, iffy, this was
an unacceptable stance. We spoke to the president of UFJ Bank in March
(just before he was forced to resign) and reminded him that with 30
percent of his stock held by non-Japanese investors, he now had a
duty to them that was greater than UFJ had ever had in the past.

He agreed.

But how short corporate memory can be. It is the responsibility of
a listed company to get the best offer for its investors, and that
means listening to alternative deals. It may turn out that the
Sumitomo Mitsui offer is dreadful -- many analysts seem to think it
is a far less attractive choice than the original deal.

But that's hardly the point. UFJ, loaded as it is with hideous
problems, should now be seen to be doing the right thing at every
turn, not reverting to type and sorting everything out behind closed
doors with a nod and a wink.

When, on Monday, UFJ did deign to read the Sumitomo Mitsui offer,
it hemmed and hawed about doing the right thing for the shareholders --
a position it only seems to have taken because those shareholders
threatened to riot.

-- The Editors

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Written and edited by Roland Kelts and
Leo Lewis (editors@japaninc.com)


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