ANZ gears up to buy Aozora Bank

The lender believes Japan offers opportunities for the group as the Japan’s hefty savings could help transform the Australian bank's structural dependence on offshore borrowing.

Seeking to take another step in its Asian expansion, Australia & New Zealand Banking Group Ltd. is in early talks with Aozora Bank Ltd. about a possible acquisition of the midsize Japanese lender, said people familiar with the matter.

Aozora, majority-owned by U.S. investment firm Cerberus Capital Management LP, has a market value of about US$4 billion, according to data provider Capital IQ.

Melbourne-based ANZ is looking to grow in Asia at a time when the Australian economy is starting to show signs of strain and its banks are contending with subdued credit growth at home. ANZ aims to get 25% to 30% of its profit from its Asian-Pacific, European and American operations by 2017, up from about 14% now.

ANZ Chief Executive Mike Smith said in December that Japan offers opportunities for the group; the country's deep pool of savings could help transform the Australian bank's structural dependence on offshore borrowing.

Banking analysts said ANZ could also be looking to tap deeper into trade flows: Japan was Australia's second-biggest trading partner in 2010, behind only China. Tokyo-based Aozora has 20 branches across Japan. ANZ, which has had a presence in Japan since 1969 and acquired a full banking license in 1984, has branches in Tokyo and Osaka that offer a range of services including trade finance, according to its website.

The talks involve ANZ's first striking a deal with Cerberus for its stake in Aozora before considering a tender offer for other shares, one of the people said. The talks are in the initial stages and may yet fall through, the people said. Cerberus had a stake of about 55% in Aozora as of March 31.

View the full story in The Wall Street Journal.