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UnionBanCal, Mitsubishi UFJ Agree to Deal

Mitsubishi UFJ offered an extra $500 million, sealing a deal the California bank had rejected just days ago.



shares surged 12% early Monday after Mitsubishi UFJ boosted its offer by $500 million for the remaining 35% stake it doesn't already own to $3.5 billion.

The San Francisco-based bank and Mitsubishi's subsidiary, the Bank of Tokyo-Mitsubishi UFJ, agreed for it to purchase the remaining publicly held shares for $73.50 a share in cash, up from the $3 billion, or $63 a share, tender offer it made last week. The Japanese bank had first bid for the remaining stake back in April for $58 a share.

The Bank of Tokyo-Mitsubishi UFJ, which has owned a stake in UnionBanCal since 1996, currently owns 65.4% of UnionBanCal. Monday's offer represents roughly a 10% premium to UnionBanCal's closing market price on Friday.

UnionBanCal had told shareholders to reject the offer last week, saying Mitsubishi was "substantially undervaluing" the company as a result of the housing crisis. Despite being headquartered in one of the most troubled states in the mortgage meltdown, UnionBanCal has remained relatively unscathed. Market observers had predicted that the Japanese bank

would raise its offer


UnionBanCal's management and a special committee made up of directors, outside counsel and financial advisors say they will recommend Monday's offer to shareholders, the companies say in a joint press release. The deal is valued at $3.5 billion and values all of UnionBanCal at $10.1 billion.

Under terms of the deal, Mitsubishi would offer to acquire the publicly held shares through the cash tender offer to be followed by a second-step merger in which any untendered shares would also be acquired at the same price, the companies say. The Japanese bank plans to begin buying shares by Aug. 29.

"This agreement will provide us with a wide range of opportunities to expand our presence in the U.S. market through our enhanced relationship with UnionBanCal," says Bank of Tokyo President Katsunori Nagayasu. "The continuing success of UnionBanCal, particularly in the challenging economic environment in the United States, is a testament to the quality of its management and board and the strong relationship we have built together over the years."

Shares of UnionBanCal recently were rising $11.9% to $73.26.