MUFG offers $3b for rest of California bank

Tokyo: Mitsubishi UFJ Financial Group (MUFG), Japan's largest bank, said it would bid $3 billion to buy the remaining 35 per cent of California's UnionBanCal as it looks for growth beyond its softening home market.

The purchase represents a significant bet by Mitsu-bishi UFJ, which is looking to increase its presence in the United States even as the world's largest economy continues to stumble through the subprime mortgage crisis.

Saddled with slow econ-omic growth and a declining population at home, Japanese financials, which have avoided much of the subprime meltdown, are increasingly aiming to boost their small market shares in the West.

"In the long-run, the move is not a mistake," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Others will likely follow suit as now is a good chance to expand their global operations by buying US, European or Asian banks. They just have to be careful to buy good banks cheaply."

Buying San Francisco-based UnionBanCal will give Mitsubishi UFJ full control of one of the 25 largest banks in the US in terms of assets. The lender has more than 300 branches across California, the most populous state in the US.

"Even as the US economy softens, UnionBanCal has been able to deliver very strong performance," a spokesman for Mitsubishi UFJ said at a briefing for reporters.

"This will allow us to further boost our presence in the United States and expand our business base."

The spokesman said having full control of the US bank would make it easier to implement group strategy, but declined to give specifics. One fund manager questioned whether the US market was the best place to go shopping now.

"With the US economy possibly worsening, is it really a good idea to use that much money to make it a full subsidiary?" said Hiroaki Osakabe, fund manager at Chibagin Asset Management.

UnionBanCal, which has a market value of nearly $8 billion, last month reported a nearly 15 per cent slide in net income on higher provisions for bad loans.

However, the bank has largely avoided the subprime mortgage meltdown that crippled other US regional lenders.

Shares of the bank have risen 19 per cent so far this year, outperforming a 20 per cent drop in the KBW Bank Index which tracks the stock performance of large US banks.

Mitsubishi UFJ said it would offer $63 a share, an 8.3 per cent premium to Monday's closing share price, for the 35 per cent of the Californian bank it does not already own.

Mitsubishi UFJ, which has a market capitalisation of almost $90 billion, becomes the latest big Jap-anese financial firm to boost its overseas presence through a large acquisition.