Japan's MUFG to pay $1.4 billion to raise Acom stake

By David Dolan

TOKYO (Reuters) - Mitsubishi UFJ Financial Group (8306.T) said it would pay $1.4 billion to more than double its stake in consumer loan affiliate Acom (8572.T) to 40 percent, as Japan's largest bank looks to strengthen its position in the struggling consumer finance market.

The move also marks an effort by the bank to streamline its consumer loan business to deal with tougher regulation. Mitsubishi UFJ said it would fold a smaller, unlisted consumer loan unit into Acom, as well as some back-office operations.

Japan's once mighty moneylenders have been hit by regulations lowering their maximum interest rates, while courts have forced them to repay interest charges now considered illegally high.

Although the stricter regulation has sapped profitability, firms are looking to take market share in order to survive.

By strengthening its ties to Japan's largest consumer finance firm, Mitsubishi UFJ will gain access to a more sophisticated platform for screening potential borrowers of unsecured loans, said Takashi Nagaoka, managing officer of Mitsubishi UFJ.

"In screening for consumer finance our ability is still not at the level of Acom," he said.

The higher stake will help make Acom a consolidated subsidiary of the bank, meaning that earnings from the consumer finance firm will be incorporated as part of the bank's group results.

Mitsubishi UFJ said in a statement that it would pay 152.6 billion yen ($1.4 billion) to lift its share in Acom to 40 percent from 15.8 percent.

The bank said it would offer 4,000 yen per share, a 28 percent premium to Monday's closing price of 3,130 yen. Shares in Acom have gained about 10 percent in the last eight trading sessions on reports that MUFG would raise its holding.

As part of the deal, Mitsubishi UFJ will merge unlisted unit DC Cash One with Acom and transfer some back office operations to Acom.

In addition to its stake in Acom, Mitsubishi UFJ also controls credit card company Mitsubishi UFJ Nicos and has a 20 percent stake in consumer lender Jaccs Co Ltd (8584.T) among others.

With a market capitalization of about $4.5 billion and 1.3 trillion yen in outstanding loans, Acom is Japan's largest moneylender by both market size and loans.

(Reporting by David Dolan; Editing by Chris Gallagher)