MITSUBISHI UFJ Financial Group Inc, Japan's biggest bank, yesterday raised its bid for successful Californian lender UnionBanCal Corp by 17 percent to US$3.5 billion.
Mitsubishi UFJ offered US$73.50 a share for the 35 percent of UnionBanCal it doesn't own, the Tokyo-based bank said yesterday.
San Francisco-based UnionBanCal recommended investors accept the offer, valuing the company at US$10.1 billion, or 12 percent more than its closing price last Friday, Bloomberg News reported.
UnionBanCal, with 330 branches in California, Washington, and Oregon states, earlier reported second-quarter profit that beat analysts' estimates after shunning subprime lending and avoiding the worst of the United States home crisis.
California's banks face rising defaults in the worst housing slump since the Great Depression.
"When the news was announced, UnionBanCal was already a fairly valued financial institution," said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Inc, which oversees more than US$1.4 trillion. "People will probably sell Mitsubishi a bit tomorrow."
UnionBanCal will recommend that shareholders accept the offer, based on an agreement with independent directors, who rebuffed two lower offers, Mitsubishi UFJ said in the statement.
The offer period will begin no later than August 29, the bank said.
Morgan Stanley advised Mitsubishi UFJ while Credit Suisse Group acted for UnionBanCal.
"This agreement will provide us with a wide range of opportunities to expand our presence in the US market," said Katsunori Nagayasu, president of the Tokyo-based company's main banking unit.
The increase in the offer, while bigger than the market expected, is "reasonable," said David Threadgold, a bank analyst with Fox-Pitt Kelton Asia Ltd in Tokyo.
UnionBanCal, up 34 percent this year, compared with a 25-percent decline in the KBW Bank Index of 24 large US banks, closed at US$65.49 last Friday. "It makes a lot of sense to increase the offer and get UnionBanCal's blessing and get the deal done," said Threadgold.
"They've got capital and they've got ambitions to add to their North American interests."
Shares of Mitsubishi UFJ, which will use cash on hand for the acquisition, have slumped 19 percent this year. They closed at 845 yen (US$7.65) yesterday.
UnionBanCal reported second-quarter profit of US$141.3 million on July 21, beating the average estimate of eight analysts surveyed by Bloomberg News.
The company was formed after Mitsubishi Bank Ltd and Bank of Tokyo Ltd merged in 1996.