Cerberus to exit Japan’s Aozora Bank

The buyout firm, which owns 821 million shares in the bank with 55% of the voting rights, will divest a portion of its holding through Aozora's year-long buyback program. The remainder will then be sold via the public market or in a private transaction.

Aozora, formerly known as Nippon Credit Bank, was nationalized in 1998 when a number of Japanese lenders struggled with non-performing loans. Stakes were subsequently sold off to private investors, including Cerberus, which in 2003 paid JPY101 billion ($1.3 billion) for a 62% stake.

When Aozora listed in 2006, the private equity player sold part of its holding for JPY570 per share, tripling its initial investment.

Aozora plans to purchase up to 330 million shares through the buyback program - 20% of total issued share capital - for as much as $1.29 billion. The bank said in a regulatory filing that the buyback will begin on October 1 and finish on September 30, 2013.

Last month the bank pledged to repay JPY227.6 billion in public funds over a 10-year period. It has extended the deadline for converting the government's preference shares into common stock until 2022, and will repay the government in full during that time.

Once repayment is completed, Aozora will be no longer subject to direct government intervention and therefore become more attractive to potential investors.

Cerberus Capital has explored exit opportunities several times in the last three years. In 2009, merger negotiations with Shinsei Bank, which is owned by J.C. Flowers, broke down. Last year, talks with Australia and New Zealand Banking Group also floundered because the parties couldn't agree on key terms.

Aozora also announced that Brian Prince will step down as CEO and be replaced by Shinsuke Baba, currently vice president and a 35-year veteran with the bank. Prince will become president.

Aozora's shares fell as much as 13% in response to the announcement on Thursday, but subsequently narrowed down to 9%.

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• Topics
• North Asia
• Financials
• Exits
• Exit
• Japan
• Cerberus Capital Management
• Financial Services