Japan’s largest bank, Mitsubishi UFJ Financial
Group, has announced it intends to spend about ¥40 billion ($378.3
million) to acquire a 49 percent stake in JALcard from struggling
Japan Airlines (JAL). The company, hit by rising fuel and labour
costs as well as several recent safety accidents, has elected to
sell off some of its shareholdings in its wholly owned credit card
subsidiary as part of a larger restructuring effort.
This move has attracted interest from numerous
overseas investment funds and larger trading houses, and Japan’s
flagship air carrier recently asked potential suitors to propose
the number of shares they hoped to buy and their offering
prices.
Aside from Mitsubishi UFJ, other bidders vying
for a stake in the credit card company include US-based private
equity firm TPG and consumer credit company Credit Saison, which is
tied to Mizuho Financial Group, Japan’s third-largest bank by
market value. Because of its existing business relationship with
JAL, Mitsubishi UFJ is believed to have an edge over its rivals.
Following the Mitsubishi offer – which was much larger than
expected by the industry – Credit Saison withdrew. Mitsubishi UFJ
and Credit Saison were previously seen as the front-runners,
because JAL viewed the ideal buyer as either a major credit card
firm or a megabank with a card company under its wing.

Surprise bidder

Japanese private equity fund Advantage Partners has recently
weighed in with a bid of its own, offering to acquire JALcard with
a mixture of debt and equity. It is believed that under this
agreement, JAL would retain an equity stake in the card company.
While the headline offer from Advantage Partners is below that of
Mitsubishi UFJ, the deals have very divergent business structures
and present differing potential income streams for the parent
company. JAL is said to be considering both offers, and is expected
to make a decision on the bidding process soon.

JALcard is ranked sixth in Japan’s credit card
industry with an estimated market value of ¥100 billion. It handled
transactions of ¥1.65 trillion in 2007 and has approximately 1.9
million cardholders.

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