Preparing to land on Tokyo Star

Advantage Partners is getting close to acquiring Tokyo Star Bank after talks of a deal first surfaced in May last year.

Japanese buyout heavyweight Advantage Partners has offered to acquire Tokyo Star Bank for up to ¥252 billion ($2.2 billion), or ¥360,000 a share, in what will be the country's largest bank takeover in two years, if successful. The completion of the deal is subject to regulatory approval.

The buyout group founded by former Bain & Co consultants has agreed to buy a 68 percent stake in Tokyo Star Bank currently owned by Lone Star funds. It is also offering to buy the rest of the bank's traded stock and delist it from the Tokyo stock exchange.

In December, Advantage had launched a bid to acquire at least 75 percent of Tokyo Star Bank for ¥189 billion and announced in its tender offer plans to privatise the bank. The offer followed months of negotiations which were jeopardised by wider credit market developments that consequently led Advantage Partners to trim its offer price.

Lone Star was reportedly looking at selling its shares last April, before the US subprime and securitised credit crisis tightened market conditions, thus forcing the buyout fund to lower its price expectations. TPG Capital and HSBC were identified as the early contenders for Lone Star's stake in the bank.

Lone Star acquired Tokyo Star predecessor Tokyo Sowa Bank in 2001 for ¥40 billion after the lender collapsed under a pile of bad debt. The bank has 35 branches and a niche in lending to small businesses. At press time, it was trading at ¥350,000 a share after having traded as low as ¥281,000 a month before the launch of the takeover bid. The shares hit a 52-week peak of ¥426,000 a share in early May 2007 after Lone Star's pending exit was reported.

Advantage Partners, according to a statement, expects intense competition in the Japanese banking market to continue and justifies the take-private as necessary in view of “near-term earnings fluctuation”. It expects the bank to be making “larger investments such as releasing new financial products and expanding marketing efforts to other regions”.

Advantage Partners officially opened a new office in Hong Kong in January. The first office outside Japan will be headed by Emmett Thomas, formerly with Monitor, a management consulting firm.