Yesterday, Mitsubishi UFJ Financial Group Inc. (MTU) announced that it has set an offer price of $4.83 per share for 2.34 billion shares that it intends to issue.

At its Board meeting on Nov 30, Mitsubishi announced to issue 2.34 billion of new shares by way of public offering along with issuing 0.16 billion shares by way of third-party allotment if required and withdrawal of the shelf registration in Japan for future equity issuances.

The share issue is a move by the management to ease concerns from government officials in the U.S. and Japan about banking stability in the wake of the financial crisis. Management said that in anticipation of changes in the global regulatory and competitive landscape, Mitsubishi UFJ intends to secure its solid capital base through this capital increase in order to continue to contribute to the real economy, both domestically and globally, as a provider of a stable source of funds and financial intermediary functions.

The company plans to utilize the proceeds from the issue to make an investment in the Bank of Tokyo-Mitsubishi UFJ, Ltd and to strengthen Mitsubishi’s overall capital base.

Mitsubishi believes that this issue will enhance its ability to pursue growth opportunities and improve its profitability besides boosting its already favorable capital ratios. The risk-adjusted capital ratios ending Sep 30, 2009, improved on a decline in risk-adjusted assets, with the Tier 1 ratio at 9.13%, above the company’s 8.0% target, and the total capital ratio advancing to 13.29%, above the 12% target.

Earlier during November, the company had planned to merge with brokerage unit of Morgan Stanley (MS). However, it had to forgo its plans because of pressure from the regulators.

Zacks Investment Research

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