UnionBanCal Corp.: Milking Mitsubishi UFJ

Includes: MTU, UB
by: Steven Towns

Below are some additional thoughts on the latest MUFG-UB offer (these comments were originally posted in response to an article published by Reuters; edited for style/formatting).

UnionBanCal's (UB) Special Committee is very opportunistic and knows what it is doing. It has effectively taken its minority stake hostage vis a vis its board representation and a long-standing one at that for the Chief of the Committee. At the end of the day, there is absolutely no “reputation risk” as MUFG (NYSE:MTU) fears. Why? Nobody on Wall Street cares!

So, is MUFG overpaying? Of course it is. Is it a good deal — yes, great for UBOC in this market. Will MUFG pay up even further as some Tokyo analysts suggest? Probably not. If so, it is even more concerning why there is such urgency on the part of MUFG. Meantime MUFG shareholders suffer and shareholder value is sacrificed over the desire to expand overseas (note it’s great to seek overseas expansion, but it has to be done at the right cost).

Bottom line, this is a so-called “safe” deal for a Japanese mega-bank. Union Bank’s SC knows this and is milking it. The offer in no way signals a bottom for banks’ woes. It also does not necessarily signal a forthcoming buying spree by foreign banks of their overseas subsidiaries. However, it would make sense for opportunistic HFs and other traders to buy shares and hold-out for more!

See: MUFG Now Really Overpaying for Union Bank, Oh Well (Shikataganai).