November 28, 2007 / 4:31 AM / 13 years ago

Nomura trails rival in Ashikaga Bank bid: paper

TOKYO (Reuters) - A group of investors led by brokerage Nomura Holdings (8604.T) has submitted a $2.7 billion bid for Japan’s Ashikaga Bank, falling short of a rival’s offer for the failed lender, the Nikkei business daily said on Wednesday.

Ashikaga, an insolvent regional bank nationalized in 2003, is being sold through a bidding process launched a year ago by Japan’s financial regulator, the Financial Services Agency (FSA).

The sale of the bank, based in Tochigi Prefecture, north of Tokyo, has proven politically touchy with locals fearing a sale to a foreign investor.

The Nomura consortium, headed by investment unit Nomura Principal Finance, has offered 290 billion yen ($2.7 billion) to buy the failed bank, lagging a 310 billion yen offer by a group of regional lenders led by Bank of Yokohama Ltd 8332.T, the Nikkei said.

“With the bids this far apart, it doesn’t look like (the Nomura group) stands much of a chance,” said Koichi Ogawa, senior portfolio manager at Daiwa SB Investments.

The FSA does not comment on the status of bids, and a spokesman for Nomura declined to comment.

Sources told Reuters in September the FSA had narrowed the field of potential buyers down to the Nomura and Yokohama groups.

The Nomura group likely decided that an investment exceeding 300 billion yen would make it difficult to secure fair returns from Ashikaga, the Nikkei said.

The bids combine the cost of buying the bank from the government and injecting additional capital.

Ashikaga was the first big Japanese bank to be nationalized since a financial crisis in 1997-98 when the government took control of Long-Term Credit Bank and Nippon Credit, both of which were later sold to U.S. investment funds.

Long-Term Credit eventually became Shinsei Bank Ltd (8303.T), and Nippon Credit was relaunched as Aozora Bank Ltd (8304.T).

POLITICALLY SENSITIVE

Some foreign private equity houses initially expressed interest in the bank, but met with opposition from politicians and businesses in the prefecture.

“There’s a lot of sensitivities involved in this,” said Jason Rogers, a credit analyst at Barclays Capital.

“More so than with a Tokyo-based bank.”

The FSA has said it will evaluate the financial conditions of each bid as well as the “sustainability and management expertise” of would-be investors and their ability to support Ashikaga’s small-business clients in Tochigi.

The latter may be an important point, as Japan’s financial services minister, Yoshimi Watanabe, is a native of Tochigi and a long-time local lawmaker.

“The fact the FSA is picking the bidder ultimately means the decision is Watanabe’s. So this is political. In the end it will likely be the group of regional banks,” Daiwa SB’s Ogawa said.

“People out in the countryside still have a negative image of brokerages.”

Sources have said the FSA’s final decision would likely come in March, but the Nikkei said the winning bidder may be picked by the end of this year.

($1=108.45 Yen)

Additional reporting by Kiyoshi Takenaka

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