Cerberus begins Aozora exit with $1.8b sell down

According to The Financial Times, Cerberus is offering 632.5 million shares to investors, including an overallotment, representing 38% of the bank's outstanding shares.

The JPY158.1 billion stated is based on Monday's closing price of JPY250 a share on the Tokyo Stock Exchange. This will be on top of the estimated JPY100 billion Cerberus made from cashing out some of its stake at a much higher price in 2006, when Aozora's IPO priced shares at JPY570.

The bank's shares plunged 10% Monday on news of the sale. Cerberus' impending exit was first revealed in September when Aozora announced that it planned to purchase up to 330 million shares through a buyback program for JPY100billion ($1.29 billion). Last week the bank said that, as of December 28, it had repurchased over 248 million shares for JPY61 billion.

The price for the tender has not been determined but will be set next week at 90-100% of the issue's closing price.

Cerberus acquired 49% of Aozora, a successor of the failed Nippon Credit Bank, in 2003 for JPY101 billion. It subsequently increased its stake up to 58% with purchases from various firms.

Nippon Credit Bank had failed in 1998 as bad loans mounted amid a nationwide banking crisis following the collapse of an asset bubble. Tokyo briefly nationalized the bank and Cerberus took control and it was again privatized.

Aozora is in the process of repaying JPY227.6 billion in bailout money to the Japanese government, which owns preference shares that were due to be converted into ordinary shares by October last year. If converted, the government would have had a stake in the bank of 22%.

Aozora has an agreement with the government to postpone conversion by 10 years during which time it will reimburse taxpayers at a price of JPY385 per share.

Cerberus has explored exit opportunities several times in the last four years. In 2009, merger negotiations with Shinsei Bank, which is owned by J.C. Flowers, broke down. In 2011, talks with Australia and New Zealand Banking Group also floundered because the parties couldn't agree on key terms.

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