Corporate directors often are accused of being pushovers. But in the case of Union Bank, the directors pushed back at a lowball takeover offer from the Japanese corporate parent -- and won a hefty premium for shareholders.
UnionBanCal Corp., the San Francisco-based holding company for Union Bank of California, agreed Monday to a $73.50-a-share buyout from Mitsubishi UFJ Financial Group. That was 27% more than the $58-a-share offer Mitsubishi made in April, and nearly 17% above the revised bid of $63 a share that the Japanese firm made last Tuesday.
Wall Street clearly was surprised by the final price: UnionBanCal's shares had closed Friday at $65.49. The stock was up $7.69, or 12%, to $73.18 on Monday on news of the deal. Looks like some arbitrageurs missed a great opportunity.
Mitsubishi was in the driver's seat on this transaction because it already owned 65% of UnionBanCal. The Japanese company, which owns Bank of Tokyo, has been the controlling shareholder of UnionBanCal, which has $60 billion in assets, since 1996.
So once the parent decided it wanted the rest of UnionBanCal as a step toward making a bigger push into the U.S. banking market, it was bound to prevail eventually.
But the responsibility of UnionBanCal's independent directors was to the public shareholders who own the remaining 35% stake. It wasn't surprising that the directors rejected the initial $58-a-share offer; you never take the first price. But Mitsubishi clearly was irked that the second offer of $63 also was turned back.
When the independent directors, led by former Sempra Energy Chief Executive Richard Farman, rebuffed the second bid, Mitsubishi last week threatened to go directly to shareholders with a hostile tender offer.
In the end, Mitsubishi came back to the table, and UnionBanCal's directors got the firm to cough up an additional $10.50 a share, much more than the market expected.
As shareholders themselves, Farman and the other independent directors were negotiating in part for their own benefit. But that just aligned them with the rest of the minority shareholders.