Security Pacific Gets Stake in Mitsui Unit
In a reversal of a trend, Security Pacific Corp. agreed Thursday to buy a 20% stake in Japanese-owned Mitsui Manufacturers Bank of Los Angeles for $38 million, strengthening international ties between Security Pacific and Mitsui Bank Ltd. of Japan
The deal with Mitsui, the world’s ninth-largest bank, is only the latest transaction between the two banking giants and fits with Security Pacific’s strategy to pursue the growing “middle market” of California business customers who are the mainstays of Mitsui Manufacturers’ business.
For Security Pacific, which has a Tokyo office and ambitions in Japan, the deal further cements a relationship with Mitsui. Last month, Security Pacific agreed to sell the Japanese bank a 5% interest in its commercial and consumer finance unit for $100 million.
The deal “is an adjunct to our middle market strategy . . . in view of the fact that they (Mitsui Manufacturers) have a number of relationships with Japanese companies,” said Robert H. Smith, president and chief executive of Security Pacific National Bank. “It gives us an opportunity to participate in those relationships,” including loans that may exceed Mitsui Manufacturers’ limits, he said.
Analysts saw the deal as unique. “It’s kind of a first,” said George Salem, senior banking analyst with Prudential-Bache Research in New York. “In the past, it’s been the foreigners buying the Americans.”
The deal affords Mitsui Manufacturers access to Security Pacific’s computer and operations technology and management expertise.
Security Pacific will provide one of its own executives to become president and chief operating officer of Mitsui Manufacturers.
Help in Tokyo
Current President Yutaro Hayashi will retain his other title of chief executive, said Takao Umino, a senior vice president with Mitsui Manufacturers.
For its part, Mitsui Bank agreed to help Security Pacific’s Tokyo office by providing operational and technical support--a way for the American bank to get a leg up in the notoriously insular Japanese market, analysts said.
The two banks will also exchange operational and product support and referrals. Mitsui Manufacturers’ customers include Japanese corporations doing business in the United States, companies that are normally difficult for U.S. banks to woo.
Mitsui and Security Pacific have cooperated in the past, including a joint venture last year in private banking.
Acquisition of the Mitsui Manufacturers stake coincides with Security Pacific’s recent decision to form a middle market bank of its own, designed to go after the growing population of businesses with $2 million to $25 million in annual sales.
Mitsui Manufacturers Bank was formed in 1981 when Mitsui Bank of California acquired the old Manufacturers Bank, formed in 1962 to service the garment industry. In the first six months of this year, the bank reported $5.7 million in earnings on assets of $1.4 billion. The bank has 12 branches, mostly in Southern California.
Security Pacific Corp. is the parent of Security Pacific National Bank, with 550 branches statewide. In terms of assets, Security Pacific is the nation’s fifth-largest bank holding company and California’s second largest.
